Boyle Valve Co. v. United States, K-66.

• Decision Date: 10 February 1930
• Docket Number: No. K-66.,K-66.
• Citation: 38 F.2d 135
• Parties: BOYLE VALVE CO. v. UNITED STATES.
• Court: U.S. Claims Court

38 F.2d 135 (1930)

BOYLE VALVE CO. v. UNITED STATES.

No. K-66.

Court of Claims.

February 10, 1930.

James S. Y. Ivins, of Washington, D. C. (Holmes, Brewster & Ivins, of Washington, D. C., on the brief), for plaintiff.

Ralph C. Williamson, of Washington, D. C., and Herman J. Galloway, Asst. Atty. Gen., for the United States.

Before BOOTH, Chief Justice, and LITTLETON, WILLIAMS, GREEN, and GRAHAM, Judges.

LITTLETON, Judge.

Plaintiff instituted this suit February 27, 1929, to recover $3,666.29, excise tax, with interest. The defendant demurs to the petition upon the ground that the facts set forth in the petition do not state a cause of action within the jurisdiction of this court, under section 424 of the Revenue Act of 1928 (45 Stat. 866).

During the years 1923 to 1926, inclusive, plaintiff manufactured and sold valves of various sizes adaptable to and used in many different kinds of machinery. The tax in question was collected under section 903, Revenue Act of 1921, and section 603, Revenue Act of 1924, which imposed a tax on automobile parts or accessories sold by a manufacturer. Plaintiff sold valves to jobbers and wholesale dealers. The Commissioner of Internal Revenue held that it was taxable upon those sales and required it to pay a tax of $1,559.22 for 1923, $410.83 for the period January 1 to July 22, 1924, $558.44 for the period September 1 to December 31, 1924, $934.91 for 1925, and $202.89 from January 1 to March 20, 1926. Payment of the tax was made to the collector, at Chicago, Ill., the last day of each month following the month in which the sales were made.

December 20, 1926, and within the time prescribed by law, the plaintiff filed two claims for refund, one for $1,970.05, or such greater amount as might be legally refundable, covering the tax paid for the period January 1, 1923, to July 22, 1924, inclusive, and another for $1,696.24, or such greater amount as might be legally refundable, for the tax paid during the period September 1, 1924, to March 20, 1926, inclusive; the basis of the refund claims being that the tax was paid on the sale of valves and other articles erroneously taxed as parts or accessories when they were ordinary commercial articles and not subject to the manufacturers' excise tax.

On December 6 and December 27, 1927, both dates being within two years prior to the institution of this suit, the Commissioner rejected the claims for refund. The reasons given by the Commissioner for the rejection of the refund claims were that the only appropriation available for refunding a tax on automobile parts or accessories was that authorized by the act of February 28, 1927 (44 Stat. 1254), no part of which was available for making refunds unless the manufacturer was able to comply with its terms; that is, the giving of a bond specified in the proviso of the act conditioned upon the immediate repayment to the United States of such portion of the amount refunded as should not be distributed within six months after date of the payment of the refund to the person who purchased, for purposes of consumption, the articles in respect of which the refund is made, and, since it appeared that plaintiff could not comply with the terms of the statute because that, in the transactions forming the basis of its claims for refund, the tax was not passed on to consumer, but was paid by plaintiff, no refund could be made.

No portion of the tax paid by plaintiff was billed separately or otherwise passed on to the jobbers or wholesalers to which it sold its valves, nor was any portion of the tax borne by those who purchased the articles for consumption, but, on the contrary, the tax was wholly absorbed and paid by the plaintiff out of its own funds without any reimbursement whatever therefor. Plaintiff neither sold its valves to nor has it any information with respect to the persons who purchased the valves for purposes of consumption. Section 424(a) of the Revenue Act of 1928 (45 Stat. 866; 26 USCA § 2424) provides as follows:

"No refund shall be made of any amount paid by or collected from any manufacturer, producer, or importer in respect of the tax imposed by subdivision (3) of section 600 of the Revenue Act of 1924, or subdivision (3) of section 900 of the Revenue Act of 1921 or of the Revenue Act of 1918, unless either —

"(1) Pursuant to a judgment of a court in an action duly begun prior to April 30, 1928; or

"(2) It is established to the satisfaction of the Commissioner that such amount was in excess of the amount properly payable upon the sale or lease of an article subject to tax, or that such amount was not collected, directly or indirectly, from the purchaser or lessee, or that such amount, although collected from the purchaser or lessee, was returned to him; or

"(3) The Commissioner certifies to the proper disbursing officer that such manufacturer, producer, or importer has filed with the Commissioner, under regulations prescribed by the Commissioner with the approval of the Secretary, a bond in such sum and with such sureties as the Commissioner deems necessary, conditioned upon the immediate repayment to the United States of such portion of the amount refunded as is not distributed by such manufacturer, producer, or importer, within six months after the date of the payment of the refund, to the persons who purchased for purposes of consumption (whether from such manufacturer, producer, importer, or from any other person) the articles in respect of which the refund is made, as evidenced by the affidavits (in such form and containing such statements as the Commissioner may prescribe) of such purchasers, and that such bond, in the case of a claim allowed after February 28, 1927, was filed before the allowance of the claim by the Commissioner."

Subsection (b) of this section (45 Stat. 866; 26 USCA § 2424, note) repealed the second proviso in section 1 of the first deficiency act for the fiscal year 1928, 45 Stat. 30, and the second proviso of the fourth paragraph in section 1 of the Treasury and Post Office appropriation act for the fiscal year 1929, 45 Stat. 169.

The position of the defendant is that under section 424 the plaintiff cannot maintain this suit, because it prevents the institution of a suit, after April 30, 1928, for the recovery of a tax paid under the Revenue Acts of 1918, 1921, and 1924; that paragraph 2 of subsection (a) grants exclusive power to the Commissioner to exercise discretion and final jurisdiction in respect of the tax in question in all cases where suit was not instituted prior to April 30, 1928. Plaintiff insists that under paragraph 2 of subdivision (a), section 424, it is clearly entitled to a refund, that the act does not vest discretionary powers in the Commissioner, that it was not intended to allow the Commissioner arbitrarily to refuse a refund on the ground that a certain fact had not been established to his satisfaction, and, by this proviso, to prevent the taxpayer from obtaining a refund by suit in court when the evidence all showed that the taxpayer came within the exception of the statute and the Commissioner had refused to consider it. Finally, plaintiff claims that, if section 424 denies it the right to a refund to which it would otherwise be entitled, because its suit for refund was not begun prior to April 30, 1928, the section is unconstitutional. It is pointed out that at the time of the enactment of the Revenue Act of 1928, in May, 1928, plaintiff had at least a year and six months within which to bring suit. It is insisted that, while Congress may shorten the period of limitation, provided it gives the plaintiff reasonable time to sue, the exercise of this power is subject to the condition that a reasonable time, taking all the circumstances into consideration, be given by the new law for the commencement of an action before the bar takes effect. That, in this instance, Congress shortened the statute of limitation to April 30, 1928, which date was already a month past when the Revenue Act of 1928 was enacted;...