K. Sreedhar Rao, Actg. C.J.

1. The material facts concerning the litigation are set out hereunder in a brief and laconic manner. The Government of India, by official memorandum, dated 24.12.1997, formulated a new Industrial Policy declaring total exemption of Central Excise Duty in the Northeastern region for a period of 10 years. The silent object of the said policy is to stimulate development of industries in the Northeastern region, which continued to be the backward region. Therefore, in order to boost and stimulate industrial activity in the Northeastern region, the policy was formulated. The significant concessions offered in the policy are in the nature of fiscal incentives to the new industrial units and their substantial expansions. The Clause C of the policy reads thus:

"FISCAL INCENTIVES TO NEW INDUSTRIAL UNITS AND THEIR SUBSTANTIAL EXPANSION.

i. Government has approved for converting the growth centers and IIDs into a total Tax Free Zone for the next 10 years. All industrial activity in these zones would be free from Income Tax, Excise for a period of 10 years from the commencement of production. State Government would be requested to grant exemptions in respect of Sales Tax and Municipal Tax.

ii. Industries located in the growth centers would also be given Capital Investment Subsidy at the rate of 15% of their investment in plant and machinery, subject to a maximum ceiling of Rs. 30.0 lakhs."

2. Pursuant to the said policy, dated 08.07.1997, a notification is issued by the Central Government, under Section 5A(1) of Central Excise Act, 1944 (in short, 'Act of 1944') and under Section 3(3) of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (in short, 'Act of 1957'), wherein the nature of industries and the areas, which are entitled to benefits are specified. The Industrial Policy of 1997 came to be expired by 23.12.1997. The Government of India, again, issued another Industrial Policy on 01.04.2007 reiterating the same terms and conditions of the earlier Industrial Policy, dated 24.12.1997. A notification, dated 24.12.1997, under Section 5A(1) of the Act of 1944 and under Section 3(3)of the Act of 1957 was issued. Both the policies and the notifications issued, pursuant to the Industrial Policies envisaged 100% exemption of excise duty on the products manufactured in the North-eastern region. The Government of India issued separate modified notifications under Section 5A of the Act of 1944 and under Section 3 of the Act of 1957, whereunder the concessions of exemption of 100% excise duty was modified and limited to the extent of value addition with varying rates of exemption of the central excise duty.

3. The respondents, in WA No. 243 of 2009 and WA No. 230 of 2009, aggrieved by the modified notifications, which withdrew the concessions earlier offered in the previous Industrial Policy and the notifications issued pursuant thereto, challenged the validity of the modified notifications as being bad in law. The learned Single Judge upheld the contention of the respondents and struck down the modified notifications, dated 27.03.2008, which were issued in respect of both the Industrial Policies.

4. The State aggrieved by the said judgment and order, has filed the two appeals. The other petitioners, who are also aggrieved by the modified notifications, have filed writ petitions challenging the validity of the said modified notifications. Since the question involved in the said writ petitions and the question involved in the writ appeals being substantially one and the same, the writ petitions have been clubbed along with the writ appeals for consideration.

5. Elaborate and enlightened arguments were canvassed by the Senior counsel, Dr. Ashok Saraf, Dr. B.P. Todi, Mr. G.N. Sahewalla and Mr. C.S. Lodha, counsel for the petitioners and they submitted the following grounds in support of the judgment of the learned Single Judge:

(a) The Government of India, by virtue of the two Industrial Policies of 1