Withholding of C declaration forms was unjustified while penalty challenge and stay applications remained pending.

Revenue may statutorily withhold C declaration forms as a recovery measure, but that power must be exercised on the facts of each case. Where the taxpayer had already paid the tax, the penalty was under challenge in second appeal, and stay applications were pending before the appellate tribunal, continued withholding was found unjustified and harsh. The writ petitions were allowed, the respondents were directed to release the C forms, and the tribunal was asked to decide the stay petitions expeditiously, with further action to remain subject to its orders.

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Issues: Whether the respondent was justified in withholding C declaration forms and whether the petitioners were entitled to release of the forms pending disposal of the stay petitions before the appellate tribunal.

Analysis: The statutory power to withhold C declaration forms was recognised, but the Court found that the power had to be exercised with reference to the facts of the case. The petitioners had already paid the tax, the penalty imposed under the relevant provision was under challenge in second appeal, and the stay petitions were pending before the appellate tribunal. In these circumstances, continued withholding of the C forms was found to be harsh, especially when the levy of penalty had not attained finality and the tribunal had not yet decided the stay applications.

Conclusion: The petitioners were held entitled to release of the C declaration forms, and the respondents were directed to issue them. The tribunal was also directed to hear and decide the stay petitions expeditiously, and further action by the respondents was made subject to the tribunal's orders.

Final Conclusion: The writ petitions were allowed with consequential directions in favour of the petitioners, while preserving the respondents' statutory power to act on any future default.

Ratio Decidendi: Even where the revenue has statutory power to withhold declaration forms as a recovery measure, such power may be declined in the peculiar facts of the case when the underlying penalty is under active appellate challenge and the taxpayer has paid the tax due.

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