Heat oil in a large skillet over medium heat; fry paneer in 2 batches until golden, about 5 minutes. Transfer fried paneer to a paper towel-lined plate to drain, retaining vegetable oil in skillet.
Melt butter in the same skillet over medium heat; cook and stir onion until golden brown, about 10 minutes. Add ginger paste and garlic paste. Continue to cook until fragrant, about 1 minute more. Stir cashews, ground red chiles, cumin, coriander, and garam masala into onion mixture. Cook and stir for 1 minute.
Stir tomato sauce, half-and-half, milk, sugar, and salt into spice mixture; simmer until thickened, about 5 minutes. Reduce heat to low. Add fried paneer and simmer until heated through, about 5 minutes more.
