Secured creditor priority prevails over State tax charge where mortgage predates crystallised tax liability.

Section 26E of the SARFAESI Act was applied to give the secured creditor priority over State tax dues where the mortgage and possession predated crystallisation of the tax liability. Section 48 of the Gujarat VAT Act was treated as operating only when the tax demand becomes finally assessed, due and payable. On the stated facts, the State did not establish a prior, crystallised and enforceable charge superior to the secured creditor's interest, so the State charge could not prevail and was liable to be removed.

---

---

Issues: Whether the secured creditor's claim under Section 26E of the SARFAESI Act, 2002 has priority over the State's charge under Section 48 of the Gujarat Value Added Tax Act, 2003, and whether the charge on the secured properties was liable to be removed.

Analysis: The dispute turned on the interaction between the State's statutory first charge for tax dues and the later central legislation conferring priority on secured creditors. The secured asset had been mortgaged and possession taken much before the tax liability was finally crystallized and the State's charge was sought to be enforced. The legal position, as applied, was that Section 26E gives priority to secured creditors over other debts and government dues, and Section 48 of the State VAT law operates only once tax liability is finally assessed and becomes due and payable. On the facts, the State had not established a prior, crystallized and enforceable charge superior to the secured creditor's interest.

Conclusion: The secured creditor was held to have priority over the subject properties, and the State's charge could not prevail.

---