Secured creditor priority prevails over sales tax arrears, and sale certificate registration must follow the settled priority rule.

Arrears of sales tax under section 24 of the Tamil Nadu General Sales Tax Act, 1959 do not create a first charge overriding a secured creditor's anterior mortgage claim. State dues and Crown debt principles apply against unsecured claims, but a secured creditor retains priority unless the statute expressly displaces that priority. On that basis, the registering authority was required to reconsider registration of the sale certificate in accordance with law and the settled priority rule, rather than refuse registration solely because of the State's tax demand.

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Issues: Whether arrears of sales tax claimed by the State could override the secured creditor's claim over the mortgaged property and whether the registering authority was justified in refusing registration of the sale certificate on that basis.

Analysis: The statutory scheme under section 24 of the Tamil Nadu General Sales Tax Act, 1959 gives priority to tax dues over other claims against the dealer's property, but it does not create a first charge overriding secured debts. The law recognised on State dues and Crown debts applies to unsecured debts, while a secured creditor having an anterior charge retains a superior claim. In the absence of a counter-affidavit and since the registration issue was still pending before the authority, no conclusive direction was issued on registration, but the authority was required to decide the matter in accordance with the settled position that the State's claim cannot prevail over secured debt unless the statute clearly creates such a first charge.

Conclusion: The State's tax claim could not displace the secured creditor's priority, and the registering authority was directed to reconsider the request for registration in accordance with law and the settled priority rule.

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