Statutory first charge on dealer's property prevails over an earlier mortgage and extends to the whole property.

Section 11AAAA of the Rajasthan Sales Tax Act, 1954 creates a statutory first charge on the dealer's property for tax-related liabilities. A mortgage does not extinguish the mortgagor's title, but the statutory charge operates on the property as a whole rather than being confined to the equity of redemption. On that basis, the first charge prevails over an earlier mortgage and takes priority over the mortgagee's interest.

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Issues: Whether the first charge created by section 11AAAA of the Rajasthan Sales Tax Act, 1954 on the dealer's property takes priority over an earlier mortgage, or whether it is confined only to the mortgagor's equity of redemption.

Analysis: Section 11AAAA creates a statutory first charge on the property of the dealer or other person liable to pay tax, penalty, interest or other sums under the Act. A mortgage carves out an interest in favour of the mortgagee, but the mortgagor's title in the property continues. The relevant distinction between a charge and a mortgage shows that a charge is a wider concept, and a statutory first charge on the property operates on the property as a whole. The charge is not confined to the equity of redemption and extends to the entire property, including the mortgagee's interest, so that the statutory charge has precedence over an existing mortgage.

Conclusion: The statutory first charge under section 11AAAA has priority over the earlier mortgage and operates on the entire property, against the assessee-bank's claim.

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