If using fresh tamarind, soak in 1/2 cup hot water for 10 minutes. Run it through a sieve to filter the juice out.
Grind coconut along with tamarind paste or tamarind juice from step 1 [read note 1 and 2], green chilies and salt to a fine paste in a blender using water as needed [see note 3].
Heat oil in a small pan on medium heat. Add mustard seeds and as they start spluttering add urad dal, byadgi chilies and curry leaves and after 10 -15 seconds take the pan off heat immediately.
Add the tempering to ground coconut paste and mix well.
If using fresh tamarind, take chunks of tamarind from the package. Soak it in 1/2 cup hot water for about 10 minutes before use. You can also substitute fresh tamarind with 1/2 teaspoon tamarind paste or 1/2 a tablespoon of lime juice.
It is hard to predict how tangy the tamarind juice will be, so always add 1/2 of the tamarind juice first, do a taste test and add the remaining.
If you are using juice from tamarind soaked in 1/2 cup of water, you may not need additional water to grind the chutney.