F. & F. LABORATORIES v. Commissioner of Internal Rev.

• Decision Date: 25 May 1939
• Docket Number: No. 6858.,6858.
• Citation: 104 F.2d 563
• Parties: F. & F. LABORATORIES, Inc., v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Seventh Circuit

104 F.2d 563 (1939)

F. & F. LABORATORIES, Inc., v. COMMISSIONER OF INTERNAL REVENUE.

No. 6858.

Circuit Court of Appeals, Seventh Circuit.

May 25, 1939.

Alan J. Altheimer and Lester E. Slosburg, both of Chicago, Ill., for petitioner.

James W. Morris, Asst. Atty. Gen., and Sewall Key, F. E. Youngman, and J. Louis Monarch, Sp. Assts. to Atty. Gen., for respondent.

Before EVANS, MAJOR and KERNER, Circuit Judges.

MAJOR, Circuit Judge.

This is a petition to review a decision of the United States Processing Tax Board of Review in accordance with provisions of Title VII of the Revenue Act of 1936 (7 U.S.C.A. § 648). The involved matter is a claim for refund of the sum of $11,235 alleged to have been paid as a processing tax on beet sugar, under the Agricultural Adjustment Act of 1933, 48 Stat. 31 (7 U. S.C.A. § 601 et seq.), for the period commencing August 1, 1934 and ending December 31, 1935. The claim was rejected by the Commissioner of Internal Revenue and was submitted to the Board of Review upon the Commissioner's motion to dismiss. The motion was granted and the petition dismissed by an order entered October 11, 1938. For the purposes of the motion to dismiss, all facts pleaded in the petition before the Board must be accepted as admitted.

The petitioner, an Illinois corporation, is, at the present time, and was, during the period from August 1, 1934 to December 31, 1935, engaged in the business of manufacturing and selling cough lozenges. In the manufacture of that product it used and consumed large quantities of beet sugar, purchased by it from the Holly Sugar Corporation of Colorado Springs, Colorado. During the above period, a processing tax imposed pursuant to Section 9 (a) of the Agricultural Adjustment Act, 48 Stat. 35, 7 U.S.C.A. § 609(a), was in effect with respect to the first domestic processing of sugar beets. With respect to such processing tax, the petition before the Board of Review alleges:

"That although the said Holly Sugar Corporation paid to the Treasury Department of the United States of America the processing taxes payable under the Agricultural Adjustment Act of the United States of America on the manufacture of the aforementioned beet sugar purchased by the petitioner from the Holly Sugar Corporation, nevertheless, the said Holly Sugar Corporation passed on the burden of said tax to the petitioner and petitioner bore the burden thereof.

"That during the period in which the processing taxes were payable under said Agricultural Adjustment Act, the purchase price of all beet sugar purchased by the petitioner from said Holly Sugar Corporation included the amount of the processing tax thereon, and all invoices received by the petitioner from the Holly Sugar Corporation, and paid by petitioner, included the amount of such processing tax either as a separate item described as such, or as a part of the invoice price charged to the petitioner.

"That petitioner has not received any refund in any amount whatsoever from said Holly Sugar Corporation of any part of the processing taxes paid by the petitioner to the Holly Sugar Corporation as above mentioned; the Holly Sugar Corporation has denied all liability to the petitioner for the refund of processing taxes paid by the petitioner to the Holly Sugar Corporation or any part thereof; and said Holly Sugar Corporation has not entered into any agreement whatsoever to refund to the petitioner such processing taxes paid by the petitioner or any part thereof.

"That during the period commencing August 1, 1934 and ending December 31, 1935, the petitioner paid to the Holly Sugar Corporation by way of processing taxes passed on to the petitioner by the Holly Sugar Corporation, the sum of Eleven Thousand Two Hundred and Thirty-five Dollars ($11,235.00), and the petitioner bore the full burden of said amount and did not pass on to its vendees any part thereof."

No claim for refund was made by the Holly Sugar Corporation.

The Agricultural Adjustment Act was held unconstitutional by the Supreme Court in United States v. Butler, 297 U.S. 1, 56 S.Ct. 312, 80 L.Ed. 477, 102 A.L.R. 914, decided January 6, 1936, and thereafter, there was enacted the Revenue Act of 1936 entitled "Title VII — Refunds Of Amounts Collected Under The Agricultural Adjustment Act." Petitioner relies upon this Act as giving it the right to a refund as asserted and also as giving the United States Processing Tax Board of Review jurisdiction to entertain its petition for refund. Section 902 of the Act, 7 U.S.C.A. § 644, provides that no refund shall be made or allowed in pursuance of court decision or otherwise "of any amount paid by or collected from any claimant as tax under the Agricultural Adjustment Act this chapter, unless the claimant establishes to the satisfaction of the Commissioner" that he bore the burden of such amount and has not been relieved thereof, or reimbursed therefor, or shifted such burden to others. Section 903, 7 U.S.C.A. § 645, relates to the filing of claims and inasmuch as the issue presented depends largely upon the construction to be given this section, we set it forth.¹

Subsection (b) of Section 906, 7 U.S. C.A. § 648 (b), provides that the Board of Review "shall have jurisdiction in proceedings under this section to review the allowance or disallowance of the Commissioner of a claim for refund, and to determine the amount of refund due any claimant with respect to such claim." Other provisions of the Act do not seem material except as they may afford light upon the construction to be adopted, and for that purpose, will hereafter be referred to.

The question presented is whether the United States Processing Tax Board of Review erred in dismissing the petition for want of jurisdiction. The solution of this question is dependent upon whether or not petitioner is within the terms of the Act so as to be entitled to the refund. Petitioner admits that the tax was paid to the United States Government by the Holly Sugar Corporation, but contends the tax was passed on to it and having not passed it on to its customers, it, as the one who bore the burden, is the real party in interest and, therefore, entitled to the refund. Respondent disputes this contention and claims that inasmuch as petitioner did not pay the processing tax directly to the Government, it was not entitled to a refund.

Petitioner, in support of its position, points out that the Act in question, in describing who may recover under its provisions, refers to the "claimant" rather than the "taxpayer," and it is argued from this that it was the intention of Congress to provide a refund for the one who bore the burden of the processing tax irrespective of whether it was the processor who paid the tax directly to the Government or whether it was the vendee of the processor who paid an increased price for the processed commodity, and in this manner sustained the burden of the tax. Stress is laid upon the language of Section 903 relating to the filing of claims, which states that "No refund shall be made or allowed of any amount paid by or collected from any person as tax under the Agricultural Adjustment Act this chapter. * * *" It is argued that the use of the word "or" distinguishes taxes "paid by" persons and those "collected from" persons. Thus it is contended two classes of claimants were intended — the words "paid by" being employed to designate a claimant such as petitioner who paid the taxes not directly to the Government, but indirectly in the increased price which was paid for the processed...