Prior secured charge over fixed deposits prevails over later sales tax recovery where the statute does not create a first charge.

A prior bank lien over fixed deposits prevailed over a later sales tax demand because the secured interest was created before the assessment orders giving rise to the revenue claim. Section 24 of the Tamil Nadu General Sales Tax Act, 1959 gave the statutory demand priority, but it did not create a first charge capable of defeating an earlier secured creditor's charge. Section 24A also did not apply, as the lien predated the assessments and there was no factual basis to treat the arrangement as a fraudulent transfer. The recovery notice therefore could not be enforced against the secured deposits, though the revenue could proceed against other assets in accordance with law.

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Issues: Whether the bank's prior lien and secured interest over the fixed deposits had priority over the sales tax demand and consequent recovery notice, and whether the revenue could invoke the fraudulent transfer provision to sustain recovery.

Analysis: The lien over the fixed deposits was created in July and August 2002, while the assessment orders giving rise to the sales tax demand were passed only in 2003 and 2004. On that factual sequence, the bank's charge was anterior in point of time. Section 24 of the Tamil Nadu General Sales Tax Act, 1959 confers priority on the statutory demand, but the provision does not create a first charge comparable to a later statutory first charge that overrides an earlier secured interest. The Court distinguished the line of authority dealing with a statutory first charge and held that, under Section 24, the prior charge of the bank must prevail. Section 24A was also found inapplicable because the lien had been created before the assessments and there was no factual basis to treat the arrangement as one made to defraud revenue.

Conclusion: The bank's prior lien had precedence over the sales tax claim, and the recovery notice could not be enforced against the secured deposits.

Final Conclusion: The statutory recovery action could not displace the bank's earlier secured charge, and the revenue was left free to proceed only against any other assets of the debtor in accordance with law.

Ratio Decidendi: Where a secured creditor's charge is created before the tax authority's demand and the statute does not confer a first charge, the prior secured charge prevails over the subsequent sales tax claim.

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