Statutory first charge for tax dues overrides prior mortgages and decree-based claims over the same property.

A statutory first charge for sales tax dues prevails over earlier equitable mortgages and decree-based secured claims over the same property. The Kerala General Sales Tax Act provisions were read with the principle of crown debt priority, and the court treated binding precedent as establishing that, where the statute creates a first charge, the State's tax claim attaches to the property as a whole and overrides prior private securities. The banks' earlier mortgage and decree did not displace that statutory priority, and the revenue recovery challenge failed.

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Issues: Whether the State was entitled to priority in recovering sales tax dues over earlier equitable mortgages and decree-based claims held by banks over the same properties.

Analysis: The legal position was examined in the light of the statutory charge under section 26B of the Kerala General Sales Tax Act, 1963, the earlier charging provision under section 23(1) of the same Act, and the principles governing crown debt priority. The reasoning drew support from Supreme Court authority holding that where a statute creates a first charge on the dealer's property, that charge operates on the property as a whole and prevails over prior mortgages and other secured claims. The earlier and subsequent decisions considered by the Court also showed that the State's tax dues rank ahead of private debts where the statute expressly confers such priority, and that this priority is not displaced merely because the bank had obtained a decree or had an earlier equitable mortgage. The Court treated the question as settled by binding precedent and held that the statutory first charge in favour of the State overrides the banks' prior securities.

Conclusion: The State's claim to recover sales tax dues had priority over the banks' equitable mortgages and decree-based claims, and the challenge to the revenue recovery proceedings failed.

Ratio Decidendi: A statutory first charge created for recovery of tax dues prevails over an earlier mortgage or other secured interest in the property, and the State's preferential right extends to the property as a whole notwithstanding prior equitable mortgages or civil decrees.

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