Caldwell Sugars v. United States, 45677.

• Decision Date: 03 April 1944
• Docket Number: No. 45677.,45677.
• Citation: 54 F. Supp. 544
• Parties: CALDWELL SUGARS, Inc., v. UNITED STATES.
• Court: U.S. Claims Court

54 F. Supp. 544

CALDWELL SUGARS, Inc., v.UNITED STATES.

No. 45677.

Court of Claims.

April 3, 1944.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Carl J. Batter, of Washington, D. C., for plaintiff.

J. A. Rees, of Washington, D. C., and Samuel O. Clark, Jr., Asst. Atty. Gen. (Fred K. Dyar, of Washington, D. C., on the brief), for defendant.

Before WHALEY, Chief Justice, and LITTLETON, WHITAKER, JONES, and MADDEN, Judges.

MADDEN, Judge.

The plaintiff sues to recover $22,392.44 paid as unjust enrichment taxes under Title III of the Revenue Act of 1936, 49 Stat. 1734-1739,26 U.S.C.A. Int.Rev.Code, §§ 700-705, for its fiscal year ending February 28, 1936.The history of its claim is as follows.The Agricultural Adjustment Actas amended, 48 Stat. 670, imposed a processing tax on the first domestic processing after June 7, 1934, of sugar cane into direct-consumption sugar.The plaintiff was engaged in that kind of processing, and for the first processing season, that is, until April 30, 1935, it paid the processing tax.After the seasonal shut-down it resumed processing in October 1935, but did not pay the tax on that processing.

On January 6, 1936, the Supreme Court of the United States, in the case of United States v. Butler, 297 U.S. 1, 56 S.Ct. 312, 80 L.Ed. 477, 102 A.L.R. 914, held that the taxing provisions of the Agricultural Adjustment Act were unconstitutional.The taxes which would have been due, but which the plaintiff did not pay, on the 65,102¼ one hundred pound units of sugar which it processed from October 1935 to January 6, 1936, amounted to $34,243.77.

Because many processors had shifted the tax by adding it to the price of sugar sold, or by other means, Congress thought that a good deal of unjust enrichment had resulted from the imposition and invalidation of the processing tax, so it, in Title III, Section 501(a)(1) of the Revenue Act of 1936, 49 Stat. 1734, imposed an 80% tax on abnormal income derived from the sale of commodities to which the processing tax had been applicable, with a limitation that the new tax should not exceed the unpaid processing tax.Since the taxpayer's net income and excess profits had been enlarged by his escape from the processing tax, and his taxes on income and profits had been accordingly increased, he was given credit for those increases, against the unjust enrichment tax.Section 502.The plaintiff filed a return on this tax on May 15, 1937, and, after the correction by the Commissioner of Internal Revenue of some of the plaintiff's computations, paid $22,392.44 of tax and interest.It seeks in this suit to recover that amount.

The unjust enrichment tax statute provided in Section 501(e) a method of determining, prima facie, whether a processor had shifted the burden of the processing tax to others, and thereby enriched himself.The method was to compare his profit, per unit of the processed article, during the period that the tax was in effect, with his profit during a period of years before that period.The application of that method to the plaintiff's situation showed a profit of $53,558.99 in excess of normal.But since the unjust enrichment tax was limited, at the outside, to the amount of the processing tax unpaid, which as we have said, was $34,243.77, the latter sum, less the credits for enlarged income and excess profits taxes, was the presumptive amount of the unjust enrichment tax.

Section 501(i) provided that the presumptive amount of the taxpayer's unjust enrichment, arrived at by the arbitrary computation prescribed by the statute, could be rebutted, by either the taxpayer or the Government,

"* * * by proof of the actual extent to which the taxpayer shifted to others the burden of the Federal excise tax the processing tax.Such proof may include, but shall not be limited to:

"(1) Proof that the change or lack of change in the margin was due to changes in factors other than the tax. * * *"

The plaintiff in this case has undertaken the burden of proving that its abnormal profits for the period of the processing tax were due to "changes in factors other than the tax."The facts are stipulated.They show that on the date that the processing tax became effective, June 8, 1934, there was a universal increase in the selling price of refined sugar, standard quality, of 55 cents per 100 pounds, which, less the customary 2% discount for cash, was a net increase of 53.9 cents; that the processing tax on such sugar was 53.5 cents; that the tax on the plaintiff's sugar, which was below standard in quality was 52.6 cents; that the plaintiff's sugar was sold during, as well as before and after, the processing tax period, at a differential of 20 to 45 cents below the current price quoted by the American Sugar Refining Company, a processor of standard grade sugar; that the plaintiff billed the processing tax separately to some purchasers from it, and received $3,709 in payment of those bills, which amount was paid to the Government and is not in issue in this case; that the plaintiff, during the period of the processing tax, effected savings of $5,685 in the cost of processing, $5,961.74 in the decreased cost of cane, not caused by shifting the tax backward to the producer, but by producing cane more cheaply from its own plantations, and $10,341.67 in the increased yield of sugar from the amount of cane used; that the sum of these three items of savings is $21,988.41; that when this sum is subtracted from $53,558.99, the amount of the plaintiff's abnormal profit for the tax period, it leaves $31,570.58, to be accounted for by reason of increases in the selling price of sugar during the tax period over the prices in the base or test period; that this amount is $2,673.19 less than $34,243.77, the amount of the processing tax imposed but not paid; that the selling price of sugar fluctuated considerably before the imposition and after the invalidation of the tax, principally in response to the apparent prospects, from time to time, of the Government's making some move to stabilize the sugar market.

On these facts, the plaintiff has not rebutted the statutory presumption that it shifted the burden of the tax to its purchasers, except as to $2,673.19.After proving its savings of $21,988.41 resulting from conditions not related to the price at which it sold its sugar, it still had $31,570.58 of the abnormal profits attributable to selling its sugar on a larger margin than normal above the cost...