State first charge prevails over prior secured interest, so sales tax dues remained recoverable from the financial corporation.

Arrear sales tax dues were held recoverable from a financial corporation that had taken over and sold an industrial unit under statutory powers, because the State's first charge over the dealer's property prevailed over the corporation's earlier mortgage or secured interest. The court applied its earlier precedent on similar facts and rejected the argument that recovery should be confined to the transferee purchaser. The recovery notice against the corporation was therefore upheld.

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Issues: Whether arrear sales tax dues of the dealer could be recovered from the financial corporation after it had taken over and sold the industrial unit under its statutory powers, in view of the State's first charge and the recovery notice issued against the corporation.

Analysis: The Court applied its earlier decision on similar facts, where it had been held that the State's right to recover sales tax dues by virtue of the first charge over the dealer's property prevails over the rights of a mortgagee or financial corporation, even if the mortgage or secured interest was earlier in point of time. The Court noted that the petitioner had taken over the unit under Section 29 of the State Financial Corporations Act, 1951 and sold the assets, but that circumstance did not displace the statutory priority of the sales tax dues. The contention that recovery should be made only from the transferee purchaser was rejected in light of the binding precedent and the nature of the State's first charge.

Conclusion: The recovery notice issued against the petitioner-corporation was upheld and the challenge failed.

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