Clawson & Bals v. Harrison, 6939.
| Citation | 108 F.2d 991 |
| Decision Date | 24 January 1940 |
| Docket Number | No. 6939.,6939. |
| Parties | CLAWSON & BALS, Inc., v. HARRISON, Collector of Internal Revenue. |
| Court | United States Courts of Appeals. United States Court of Appeals (7th Circuit) |
Thomas M. Kavanagh, of Chicago, Ill., and E. R. Morrison, Delos C. Johns, and W. B. Cozad, all of Kansas City, Mo., for appellant.
George H. Zeutzius, Sp. Asst. to Atty. Gen., Dept. of Justice, Tax Division, Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key, Norman D. Keller, and George H. Zeutzius, Sp. Assts. to the Atty. Gen., for appellee.
Before SPARKS, MAJOR, and TREANOR, Circuit Judges.
This is an appeal from the judgment of the District Court dismissing plaintiff-appellant's action for the refund of $54,232.02, assessed and paid by plaintiff, as manufacturer's excise taxes and interest.
The sole question presented is whether sales of automobile connecting rods by plaintiff were taxable under the statute which imposes a tax upon automobile parts "sold by the manufacturer, producer, or importer" thereof.1
The taxpayer is a corporation authorized under the laws of Illinois "to manufacture, buy, sell, export and import, deal in and deal with all kinds of automobiles and automobile accessories, and all other articles incident to automobiles * * *." It prepares connecting rods from steel forgings, for sale in the trade, and concedes that it is a manufacturer or producer within the taxing statute, of these connecting rods. It also prepares rods from used connecting rods which have been discarded and replaced by new rods, but contends that in respect to these rods it is a repairer and not a manufacturer or producer.
The rods in question connect the piston head to the crank shaft, and serve to transmit the power generated in the cylinder to the crank shaft, being attached to the crank pin of the latter. There is a ring bearing made of a babbit metal, known as the crank shaft bearing, in the large end of the connecting rod, such bearing being included partly within the cap and partly within the shank of the rod. The cap and shank are held together by bolts and nuts. The smaller end of the rod is known as the wrist-pin end; and approximately half of the rods prepared by plaintiff during the taxable period had bronze bushings in the wrist-pin end. These bushings are ring bearings, and for the rods which have them they are "just as important and just as necessary as the babbit bearing" at the larger, or crank shaft, end of the rod.
The taxpayer obtains its supply of used rods chiefly from jobbers or from persons known in the trade as "junkies." When plaintiff receives the second hand rods they are unusable as connecting rods because the babbit bearings and bronze bushings are worn; and in many of the discarded rods old shims between the cap and shank must be replaced and the rods realigned. The first operation is to separate the cap and shank by the removal of two bolts and nuts. Usable bolts and nuts are not replaced in the caps and shanks from which they are removed but are thrown into the general mass of nuts and bolts, new and old. The shank and cap are separately placed in a melting pot where all of the old babbit metal bearing is removed.
This ends the dismantling process by which the original used rod is reduced, in form, to two pieces of steel which must be subjected to various operations, including machine work, in the process of being prepared for sale as connecting rods. According to taxpayer's witness the processes and operations consist of grinding operations, machining operations and assembling and combining of new with old materials, a combining of all materials, and the utilization of workmanship and skill.
When the taxpayer buys new forgings from which to prepare connecting rods a forging may consist of a single unit or of two units, one unit forming a cap and the other the shank. If the forging is in the form of a single unit, a portion of one end is sawed off to form the cap. Each new forging is designed for a connecting rod for the motor of a particular make and model of automobile and carries an identification mark and number. In the case of a new forging the necessary machine work required to convert it into a connecting rod includes boring out the big end and the small end, drilling the necessary bolt holes, performing of necessary milling work, cutting off the cap if the forging is in one piece, and drilling oil relief holes.
Taxpayer's witness testified that when the forging arrives at the babbitting stage it undergoes substantially the same process and operations as the used rods. These operations are performed by the same men and by the same machines.
The first step in assembling the parts of the connecting rod consists of fastening the cap and arm together; but before this is done some of the babbitting operations are performed. A flux is applied to the inner surfaces of the semi-circular openings of the cap and shank to prepare the steel metal for a coating of tin, which in turn acts as a bond for the babbit metal and the steel cap and shank. This is described by a witness as a bonding operation. A coating of flux is necessary to cause the tin to adhere to the steel and, in the words of the witness, "that acts as a bond and makes the babbit metal stick so it becomes a part of the steel."
Following the application of the flux the arm and cap are separately dipped into a pot containing the molten tin; then the cap and arm are put into a machine with the proper size of mold and the molten babbit metal is poured into the bearing openings. The cap and arm are then subjected to a lathing, or abrasing operation for the purpose of removing the babbit metal which protrudes from the respective portions of the bearing ring in the cap and arm. This latter operation leaves an even surface and the cap and arm are assembled and fastened together with the bolts and nuts, the bearing portions of the cap and arm which are thus brought together forming a perfect circle. An opening is then drilled through the babbit metal, the opening being approximately 10/1000 of an inch smaller than the finished diameter of the bore, which is attained by a broaching operation. Oil grooves and channels are cut on the inside of the babbit bearing for oiling purposes and oil holes are drilled through the babbit to connect with oil holes in the steel cap or shank. The assembled rod if composed of parts of an old rod, is then placed on a pressing machine where the old worn bushing is forced out and a new bushing forced in the bushing operation being required...
To continue reading
Request your trial
-
Broad Motors Co. v. Smith, C. A. No. 7658.
...United States v. Armature Exchange, 9 Cir., 116 F.2d 969, certiorari denied 313 U.S. 573, 61 S.Ct. 960, 85 L.Ed. 1531; Clawson & Bals v. Harrison, 7 Cir., 108 F.2d 991, certiorari denied 309 U.S. 685, 60 S.Ct. 808, 84 L.Ed. 1028. See also, S. T. 927, 1942-2 Cum.Bull. 225; S. T. 932, 1945 Cu......
-
Schulte Oil Co., Inc. v. Oklahoma Tax Com'n
...805 P.2d 110, 111-112 (1990).22 For a discussion of the distinction between a "repairer" and "manufacturer" see Clawson & Bals, Inc. v. Harrison, 108 F.2d 991, 994 (7th Cir.1940); State v. Ill. Cent. Gulf RR., 54 Ala.App. 131, 306 So.2d 1, 2, 4 (1975); Eastern Machinery Co. v. Peck, 160 Ohi......
-
LeTourneau Sales & Service, Inc. v. Olsen
...Armature Exchange, Inc., 116 F.2d 969 (9th Cir.), cert. denied, 313 U.S. 573, 61 S.Ct. 960, 85 L.Ed. 1531 (1941); Clawson & Bals, Inc. v. Harrison, 108 F.2d 991 (7th Cir.1939), cert. denied, 309 U.S. 685, 60 S.Ct. 808, 84 L.Ed. 1028 (1940); Broad Motors Co. v. Smith, 86 F.Supp. 4 (E.D.Penn.......
-
United States v. Armature Rewinding Co.
...Bearing Service of Oakland, Ltd., 9 Cir., 124 F.2d 373, decided December 15, 1941. In line with those decisions is Clawson & Bals, Inc. v. Harrison, 7 Cir., 108 F.2d 991, certiorari denied, 309 U.S. 685, 60 S.Ct. 808, 84 L.Ed. 1028, in which it was held that sales of connecting rods for aut......