Com. v. Sitkin's Junk Co.

• Decision Date: 01 May 1963
• Docket Number: No. 1,1
• Parties: COMMONWEALTH of Pennsylvania v. SITKIN'S JUNK CO., Inc. (Appellant at,
• Court: Pennsylvania Supreme Court

Page 199

194 A.2d 199

412 Pa. 132

COMMONWEALTH of Pennsylvania v. SITKIN'S JUNK CO., Inc. (Appellant at No. 1, May Term 1963), Sitkin's Metal Trading, Inc. (Appellant at No. 2, May Term, 1963).

Supreme Court of Pennsylvania.

Oct. 9, 1963.

Lewis H. Markowitz, W. William Anderson, Markowitz, Kagen & Griffith, York, Howard Gould, Gould & Reichert, Cincinnati, Ohio, for appellants.

Edward T. Baker, Deputy Atty. Gen., Walter E. Alessandroni, Atty. Gen., Harrisburg, for appellee.

Before BELL, C. J., and MUSMANNO, JONES, COHEN, EAGEN, O'BRIEN and ROBERTS, JJ.

JONES, Justice.

These appeals present one issue: the taxability, under the 'Selective Sales and Use Tax Act' of 1956 [Act], ¹ of machinery sold to, or used by, persons who purchase mixed unsorted scrap and, by the use of such machinery, sort, cut, bale and compress such scrap into forms suitable for sale to various steel mills.

Sitkin's Junk Co., Inc., and Sitkin's Metal Trading, Inc., [taxpayers] are engaged in the scrap business in the course of which they purchase from homes, farms, industries and other sources scrap which is mixed and unsorted. Upon receipt of such scrap, the taxpayers remove therefrom the unusable and unsalable portions and the 'metallic scrap remaining is sorted, sometimes cut into convenient lengths, sometimes baled and in any event then sold to various steel mills.' ² As purchased, the mixed unsorted scrap has little, if any, commercial value; after handling and preparation by the taxpayers, such scrap becomes an article highly useful in the production of steel. In the handling and preparation of such scrap, the taxpayers employ certain machinery--alligator shears, hydraulic presses, acetylene torches, etc.--and the Commonwealth herein seeks to sustain the validity of taxes levied under the Act upon the sale to, or the use by, the taxpayers of such machinery. The taxpayers claim that, by reason of the nature of their business, they are within the so-called manufacturing exclusions of the Act.

After the Commonwealth had assessed taxes against the taxpayers for the period from March 7 to November 30, 1956 and after the taxpayers had unsuccessfully exhausted their administrative remedies under the Act, appeals were taken to the Court of Common Pleas of Dauphin County. After a hearing at which certain facts were stipulated and oral testimony received, that court directed the entry of judgments for the amount of the taxes against the taxpayers. From the entry of such judgments these appeals were taken.

Section 201(a) [72 P.S. § 3403-201] imposes a tax on 'each separate sale at retail' of tangible personal property, the purchaser to pay the tax to the vendor for transmission to the Commonwealth. Section 201(b) [72 P.S. § 3403-201] of the Act imposes, inter alia, a tax 'upon the use * * * of tangible personal property purchased at retail', the tax to be paid to the Commonwealth by the persons who make such use. ³

The Act [Section 2(j), 72 P.S. § 3403-2], in defining a 'sale at retail' of tangible personal property upon which the tax is imposed under Section 201(a), specifically excludes a transfer of tangible personal property either for the purpose of resale or of 'machinery and equipment * * * to be used * * * in any of the operations of--(a) The manufacture of personal property * * *.' and the Act [Section 2(n), 72 P.S. § 3403-2], in defining 'use' of tangible personal property, specifically excludes the 'use * * * of tangible personal property * * * in any of the operations of--(i) The manufacture of personal property; * * *.' ⁴

Whether the instant taxes be imposed upon a theory of a 'sale at retail' or a 'use', the real crux of the problem is whether taxpayers' machinery is employed in the 'manufacture of personal property' as that phrase is defined in the Act.

The Act defines 'manufacture' as: '[t]he performance of manufacturing, fabricating, compounding, processing or other operations, engaged in as a business, which place any personal property in a form, composition or character different from that in which it is acquired whether for sale or use by the manufacturer, and shall include, but not be limited to--(1) Every operation commencing with the first production stage and ending with the completion of personal property having the physical qualities * * * which it has when transferred by the manufacturer to another; * * *'. Sections 2(c), 2(c)(1). Our inquiry is whether the modus operandi of taxpayers in the handling of the scrap from the time of its acquisition until it assumes a form available for sale to the various steel mills constitutes a 'manufacture of personal property' within the statutory definition of 'manufacture'.

The court below held that the taxpayers' operations did not constitute a 'manufacture of personal property' under the Act and that the sale to, and the use by, the taxpayers of the machinery was taxable. In reaching that conclusion, the court relied in large measure upon Commonwealth v. Donovan, 76 Dauphin 191. In Donovan, (76 Dauph. p. 192) the court said that '* * * prior to the adoption of the [Act] this taxpayers' activities would not be manufacturing as that term has been defined * * * under other tax statutes. * * * The cases hold that a 'new and different' product must emerge or the activity is something less than manufacturing.' With that summary of the law prior to the Act we are in accord. However, in the statutes which antedated the Act and out of the construction of which evolved this judicial definition of 'manufacture' or 'manufacturing', generally there was no definition of 'manufacture' and the courts resorted to the popular conception of the meaning of that term. In the Act now under construction the legislature has seen fit to define at some length the term 'manufacture'.

In Donovan, (76 Dauph. p. 198), the court further said: '[t]here is little doubt that the legislature in adopting the definition of manufacturing [in the instant Act] intended only to describe the process of manufacturing and not to enlarge it beyond the definition that had been developed by over 100 years of careful judicial review.' Upon this rationale, the court below applied to the construction of 'manufacture' under this Act judicial definitions of 'manufacturing' under prior tax statutes; in this respect the court erred. It was the duty of the court to apply that definition of 'manufacture' which the legislature set forth in the instant Act and not to substitute there for judicial definitions of that term under prior tax statutes.

When this Act was passed the legislature presumably was fully aware of the construction placed upon 'manufacture' by the courts under the prior statutes. Where the legislature, in a later statute, uses the same language as used in a prior statute which has been construed by the courts, there is a presumption that the language thus repeated is to be interpreted in the same manner such language had been previously interpreted when the court passed on the earlier statute. Jones and Laughlin Tax Assessment Case, 405 Pa. 421, 432-433, 178 A.2d 856; Parisi v. Philadelphia Zoning Board of Adjustment, 393 Pa. 458, 462, 143 A.2d 360. Had the legislature intended that 'manufacture' or 'manufacturing' be given under the Act the same construction previously given all that was necessary in the new statute was to use the words 'manufacture' or 'manufacturing'. Instead, the legislature drafted a somewhat lengthy definition of 'manufacture', twice amended since its enactment. We have long held that, where a statute contains its own definition, the meaning of the terms as defined at common law or as constructed under prior statutes is not controlling: Blauner's, Inc., et al. v. Philadelphia, et al., 330 Pa. 342, 349, 198 A. 889; Kohn v. Philadelphia, et al., 151 Pa.Super. 635, 642, 30 A.2d 672. By specifically defining 'manufacture', the legislature indicated its intent that 'manufacture' be construed in accordance with the statutory language and that the construction of such word was not to be controlled by prior judicial construction of such word under prior tax statutes. By way of example, the Act provides that the finished product be 'different' from that form in which it was acquired whereas under prior judicial construction the finish ed product had to be both 'new and different'.

Furthermore, '* * * we have repeatedly said in the construction of a statute 'that presumably every word, sentence or provision therein is intended for some purpose, and accordingly must be given effect [citing cases]'. Commonwealth v. McHugh, 406 Pa. 566, 569, 178 A.2d 556, 557, 558; Statutory Construction Act of May 28, 1937, P.L. 1019, art. IV, § 51, 46 P.S. § 551. Considering all the language contained in the statutory definition of 'manufacture', we are convinced that prior judicial authority is not controlling in the definition of that word under this Act.

In its definition of 'manufacture', the Act (Section 2(c)) emphasizes two criteria, i. e. the type of the activity and the result of that activity. To constitute 'manufacture', first, the type of the activity must fall into one or more categories, i. e. 'manufacturing, fabricating, compounding, processing or other operations' and second, as a result of one or more types of the prescribed activities, the personal property must be placed 'in a form, composition or character different from that in which [such personal property]' was acquired. (Emphasis supplied). In the case at bar, it is undisputed that the taxpayers do not 'fabricate' or 'compound' the scrap nor is there any merit in their contention that they 'process' such scrap. To come within the orbit of exclusion from the imposition of these taxes the taxpayers' activities must fall within the category of 'manufacturing' or 'other operations' if the latter words have a meaning apart from the other words in the definition.

It may be argued that the words 'other operations', under the...