Prior secured creditor rights defeated sales tax attachment where mortgage and securitisation predated the State's claim.

A prior mortgage and securitisation-based sale of secured assets prevailed over a later sales tax attachment, because the Court treated the competing claims by reference to the relevant statutory regime and the nature of the security interest. The State could not continue the attachment or claim priority for VAT dues merely on the basis of a first-charge provision where the secured creditor's interest had arisen earlier and the assets had already been dealt with under the securitisation process. The revenue attachment was therefore not allowed to displace the secured creditor's rights, and removal of the attachment followed.

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Issues: Whether the State could continue the attachment and claim priority for sales tax dues over the secured creditor's prior mortgage and sale of the secured assets.

Analysis: The property had been mortgaged long before the sales tax attachment, and the Court applied the settled principle that a statutory first charge must be tested in the light of the relevant enactment and the nature of the competing security interest. The Court relied on the later statutory regime conferring priority on secured creditors and held that the State's reliance on the first-charge provision under the VAT law could not defeat the prior secured interest in the facts of the case. The Court further held that the attachment could not be continued merely because tax dues were outstanding where the secured assets had already been dealt with under the securitisation process.

Conclusion: The attachment in favour of the State could not prevail over the secured creditor's rights, and the petitioners were entitled to removal of the revenue attachment.

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