284 U.S. 498 (1932), 251, Miller v. Standard Nut Margarine Co. of Florida

Docket Nº:No. 251
Citation:284 U.S. 498, 52 S.Ct. 260, 76 L.Ed. 422
Party Name:Miller v. Standard Nut Margarine Co. of Florida
Case Date:February 15, 1932
Court:United States Supreme Court

Page 498

284 U.S. 498 (1932)

52 S.Ct. 260, 76 L.Ed. 422

Miller

v.

Standard Nut Margarine Co. of Florida

No. 251

United States Supreme Court

Feb. 15, 1932

Argued January 6, 1932

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Syllabus

1. A suit to restrain collection of an excise imposed under the Oleomargarine Act is a suit to restrain collection of a tax, within the meaning of R.S. § 3224, and not a suit to collect a penalty. P. 506.

Page 499

2. Tax laws are to be interpreted liberally in favor of taxpayers; words defining things to be taxed may not be extended beyond their clear import; doubts must be resolved against the Government and in favor of the taxpayer. P. 508.

3. R.S. § 3224 is declaratory of the equitable rule that a suit will not lie to restrain the collection of a tax upon the sole ground of its illegality, and it should be construed as nearly as may be in harmony with that rule and the reasons upon which it rests. P. 509.

4. The section is general, and should not be construed as abrogating, by implication, the other equitable principle which permits suit to restrain collection where not only is the exaction illegal, but there exist special and extraordinary circumstances sufficient to bring the case within some acknowledged head of equity jurisprudence. Id.

5. The Oleomargarine Tax Act, before the Amendment of July 10, 1930, did not apply to substances resembling butter but containing no animal fat. P. 506.

The product in question was made exclusively of cocoanut and peanut oils, salt, water and harmless coloring matter, and was sold for cooking, baking and seasoning.

6. Plaintiff made and sold a product not taxable under the Oleomargarine Act in reliance upon determinations by courts and the Commissioner of Internal Revenue interpreting the Act as inapplicable in like cases and upon assurance from the Bureau that its product would not be taxed. Later, the Commissioner changed his ruling, and, while not attempting to collect from other makers of like products who had obtained injunctions in which he had acquiesced and which had become final, directed that the tax be enforced against plaintiff's entire product from the beginning. This would have destroyed the business, ruined the plaintiff financially, and inflicted loss without remedy at law. Held that the Commissioner's action was not only based upon an erroneous construction of the statute, but was arbitrary and capricious, and that a suit could be maintained in the circumstances to enjoin the collection. Pp. 508-510.

42 F.2d 79, 85, affirmed.

Certiorari to review affirmances of two decrees permanently enjoining collectors from collecting taxes imposed under the Oleomargarine Tax Law prior to the 1930 Amendment.

Page 502

BUTLER, J., lead opinion

MR. JUSTICE BUTLER delivered the opinion of the Court.

No. 251

Respondent, a manufacturer of "Southern Nut Product," brought this suit in the Southern district of Florida to restrain petitioner from collecting from respondent, or from dealers selling its product, any tax purporting [52 S.Ct. 261] to be levied under the Oleomargarine Act of August 2, 1886, 24 Stat. 209, as amended by the Act of May 9, 1902, 32 Stat. 194. Petitioner answered denying the essential allegations of the complaint. Respondent applied for a temporary injunction; the court found that it would suffer irreparable injury unless petitioner be restrained pending the final disposition of the case, and granted the application. At the trial, respondent introduced oral and

Page 503

documentary evidence, together with specimens of the product sought to be taxed. The court found that the material allegations of the complaint were established by the evidence, and granted permanent injunction. The record states in condensed form the substance of the testimony, but does not contain the documents which were made exhibits and introduced in evidence. The Circuit Court of Appeals found, and it appears from the testimony brought up, that omitted exhibits constitute a material part of the evidence received, and that the record is consistent with the trial court's conclusion in respect of the facts; it held R.S. § 3224 does not apply, and affirmed the decree. 49 F.2d 79, 85.

That section declares: "No suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court." This suit was commenced December 26, 1929. The complaint, the evidence contained in the record, and documents of which judicial notice may be taken show the following facts:

In April, 1928, respondent commenced and thereafter carried on at Jacksonville, Florida, the manufacture and sale of Southern Nut Product. It contained no animal fat, but was made exclusively of cocoanut oil, peanut oil, salt, water, and harmless coloring matter; it was sold in one-pound cartons for cooking, baking, and seasoning. Respondent built up a valuable business in the sale of the product to dealers in Florida and other states.

In January, 1922, the Commissioner of Internal Revenue issued to the Higgins Manufacturing Company a permit to manufacture and sell "Nut-Z-All" without paying the oleomargine tax thereon. He revoked the permit in December of the same year, and purported to assess such a tax upon some of that product. The company, having paid it under protest to the collector in Rhode Island, brought an action against him in the

Page 504

United States district court for that state to recover the amount so exacted. After hearing evidence, including the testimony of chemists in the Bureau of Internal Revenue called in behalf of the collector, the court, in April, 1924, found that the product was not made in imitation or semblance of butter, was not intended to be sold as or for butter, and was not oleomargarine or taxable as such. Higgins Mfg. Co. v. Page, 297 F. 644. Thereupon, the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, promulgated the court's decision as Treasury Decision 3590, thus informing all concerned that the product was not subject to the tax.

In August, 1924, the Deputy Commissioner, in answer to an inquiry made by the Institute of Margarine Manufacturers as to the taxability of "Nut-Z-All," sent a letter stating:

The court having held the product to be not taxable as oleomargarine, the fact that retailers advertise and sell it as butter, or as a substitute for butter, would not render them or the manufacturers liable under the internal revenue law.

April 1, 1927, the Commissioner, contrary to the court's decree, Treasury Decision 3590, and his deputy's response to the Institute's inquiry, promulgated Treasury Decision 4006, which declared products similar to "Nut-Z-All" taxable as oleomargarine if colored to look like butter. Then the Higgins Manufacturing company brought suit in the federal court for Rhode Island to restrain the collector from enforcing the tax on its product. The court, upon the allegations of the complaint admitted by motion to dismiss, found that the facts there alleged in respect of taxability were identical with those shown in the earlier case; that the collector was threatening to enforce the tax which had been adjudged illegal; that, if the tax should be collected, plaintiff's business would be ruined, and, July 18, 1927, granted temporary injunction,

Page 505

20 F.2d 948, which was made permanent in December following.

In July, 1927, the Baltimore Butterine Company brought suit in the Supreme Court of the District of Columbia to enjoin the Commissioner and his deputy from enforcing the tax as declared in Treasury Decision 4006 against its product "Nu-ine" which was identical in content and appearance with "Nut-Z-All," made by the Higgins Manufacturing Company, and Southern Nut Product, made by respondent in this case. The court held the product not taxable, and granted a permanent injunction.

No appeal...

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