Boswell v. Abex Corp.

• Decision Date: 28 May 1975
• Citation: 317 So.2d 314,55 Ala.App. 477
• Parties: Charles A. BOSWELL, as Commissioner of Revenue of The State of Alabama, v. ABEX CORPORATION, a corporation. Civ. 475.
• Court: Alabama Court of Civil Appeals

Page 314

317 So.2d 314

55 Ala.App. 477

Charles A. BOSWELL, as Commissioner of Revenue of The State of Alabama, v. ABEX CORPORATION, a corporation.

Civ. 475.

Court of Civil Appeals of Alabama.

May 28, 1975.

Rehearing Denied June 11, 1975.

William J. Baxley, Atty. Gen., Willard W. Livingston, Counsel, Dept. of Revenue, and Asst. Atty. Gen., B. Frank Loeb, Asst. Counsel, Dept. of Revenue, and Asst. Atty. Gen., for appellant.

Steiner, Crum & Baker, M. R. Nachman, Jr., Montgomery, for appellee.

HOLMES, Judge.

The Circuit Court of Montgomery County issued an alternative writ of mandamus to the Commissioner of Revenue for the State of Alabama ordering the commissioner to refund to appellee-taxpayer $8,562.00. From this order, the commissioner has taken this appeal.

The learned and distinguished trial judge, after a hearing Ore tenus, made a detailed finding of fact and conclusion of law.

This court has carefully reviewed the controlling authorities as they apply to the instant appeal.

The judgment of the trial court is correct and cannot be improved upon and we therefore, as set out below, adopt the pertinent part of his order as our own and affirm the ruling of the lower court.

'It is undisputed between the parties that the petition for refund of use taxes filed on February 20, 1974, by Abex with the State Department of Revenue (hereinafter 'Department') was in regular form as required by Title 51, Section 913, Alabama Code, and sought refund of use taxes allegedly paid under mistake of law or fact for the period July 1, 1970 through July 30, 1973, in the total amount of $8,562.00. Respondent has not questioned the appropriateness of this mandamus proceeding to review the denial of the petition for refund of use taxes in this amount. In short, the parties do not question that if Abex is correct in its substantive contention that the Alabama use tax does not attach to the transactions involved in these tax payments, then it is entitled to an order from this Court directing a refund of use taxes of $8,562.00.

'With these threshold matters out of the way, the Court proceeds to findings of fact and conclusions of law based upon the oral testimony and documentary and physical evidence. Upon such competent testimony, the Court finds as follows:

'FINDINGS

'The testimony is literally without dispute. Abex at all relevant times was engaged in the State of Alabama in the production of steel car wheels for sale to railroad companies. The process is described in detail in the oral testimony, and is illustrated by the photographs. Abex paid use taxes for the period involved--taxes which it now claims were mistakenly and erroneously paid--on the purchase by Abex of certain graphite or carbon electrodes. These electrodes perform a dual purpose--they supply heat for the furnace in which metal is melted as part of the process of producing wheels for railroad cars; and the electrodes supply carbon which enters into and becomes an ingredient or component part of the steel wheels manufactured by Abex. It is without dispute that the carbon contained in the electrodes united with the other metals, that carbon is required by the Association of American Railroads specifications in a certain degree in railroad wheels; that this carbon is required to improve the quality of the wheels; and that the electrodes furnish this carbon, at least in part, and are consumed in the manufacturing process.

'The gist of Abex's position before the Department and here is that its purchase of the electrodes was at wholesale under the following definition from the applicable portion of Title 51, Section 787(d), Alabama Code:

"The term 'wholesale sale' or 'sale at wholesale' means any one of the following: * * * a sale of tangible personal property or products (including iron ore) to a manufacturer or compounder which enters (enter) into and becomes (become) an ingredient or component part of the tangible personal property or products which such manufacturer or compounder manufactures or compounds for sale, and the furnished container and label thereof . . .'

Since the use tax, by its terms, is imposed only on the storage, use or other consumption of tangible personal property 'purchased At retail' Title 51, Section 788(b) (emphasis supplied), the purchases of carbon electrodes, at wholesale sale rather than retail sale, were not subject to tax.

'The Department denied the refund on the basis that the carbon electrodes were machine parts, and that, even though carbon from the electrodes entered into and become an ingredient or component part of the manufactured steel wheels, their purchase was, nevertheless, also subject to tax.

'In 1968 Abex applied for and secured a refund of the same Alabama use taxes on the same transactions because Abex and the Department found controlling the decision in State v. U.S. Steel, 281 Ala. 553, 206 So.2d 358. That case held that oxygen purchased by U.S. Steel, less than 1 percent of which became an ingredient part of the finished steel, was a wholesale sale and thus not subject to tax. The court, moreover, gave considerable weight to the departmental regulations, particularly Rule W27--171 which read then, and reads now, in pertinent part as follows:

"Any material purchased by a...