Curry v. Alabama Power Co.

• Decision Date: 05 June 1942
• Docket Number: 3 Div. 348.
• Parties: CURRY, Commissioner of Revenue, v. ALABAMA POWER CO.
• Court: Alabama Supreme Court

8 So.2d 521

243 Ala. 53

CURRY, Commissioner of Revenue, v. ALABAMA POWER CO.

3 Div. 348.

Supreme Court of Alabama

June 5, 1942

Thos. S. Lawson, Atty. Gen., and John W. Lapsley and J. Edw. Thornton, Asst. Atty. Gen., for appellant.

Martin Turner & McWhorter, of Birmingham, for appellee.

LIVINGSTON, Justice.

This action was instituted by appellee, Alabama Power Company, a corporation, by a petition for a declaratory judgment (Title 7, § 156 et seq., Code of 1940) to determine the validity of an assessment of use taxes made against it under the provisions of the Alabama Use Tax Act, Title 51, § 787 et seq., Code of 1940; and to determine whether the appellee is entitled to a refund of the tax paid under protest.

The tangible personal property involved in the assessment consists of boilers, engines, condensers, generators and transformers, and attachments and replacements therefor purchased by appellee from without the State during the period from January 1, 1940, to March 31, 1940, for use in the generation, manufacture or distribution of electricity in the conduct of its business as a public utility.

Appellee insists that such items constitute machines or machinery used by it in processing or manufacturing tangible personal property, and are therefore exempt under the provisions of paragraph (q) of section 789, Title 51, Code of 1940, which reads as follows:

"§ 789. Exemptions.--The storage, use or other consumption in this state of the following tangible personal property is hereby specifically exempted from the tax imposed by this article: * * * (q) Machines used in mining, quarrying, compounding, processing and manufacturing of tangible personal property; provided that the term 'machines,' as herein used, shall include machinery which is used for mining, quarrying compounding, processing or manufacturing tangible personal property, and the parts of such machines, attachments and replacements therefor, which are made or manufactured for use on or in the operation of such machines and which are necessary to the operation of such machines and are customarily so used."

By demurrer and answer, appellant presented the issue and contended that the use tax applied to the items involved, and that the exemptions claimed could not be allowed for the reasons, (a) that appellee is not engaged in processing or manufacturing tangible personal property, within the meaning of said Act; (b) the production or generation of electricity does nor constitute the processing or manufacturing of tangible personal property within the meaning of said Act (c) electricity is not tangible personal property within the meaning of said Act, and (d) the transformers involved in said assessment are not machines or parts thereof, or attachments or replacements therefor within the meaning of the machinery exemption clause of said Act.

The lower court entered a decree holding the assessment invalid, and that appellee is entitled to a refund of the tax paid under protest, hence this appeal.

The evidence without conflict established the fact that the tangible personal property involved in the assessment was used by appellee during the period covered by the assessment in the generation and distribution of electricity.

Illustrative of the expert testimony offered in behalf of appellee, we quote from the testimony of Dr. K.B. McEachron:

"Electricity can properly be explained by understanding first the construction of the atom, and, to understand that, we have to begin with the molecule. In other words, this desk or the chair in which I am seated is composed of molecules, and those molecules are composed of atoms. The atom is known today to consist of a center portion--call it the kernel, if you want to--which contains positive electrical charges, and it contains an outside shell, or series of shells, containing electrons which is a name given to particles which may be either positive or negative, but in this case negative. In the case of the desk or the chair, the positive and negative charges are substantially equal, which means that, electrically speaking, the desk or chair is neutral; * * * has no charge, one way or another. Of course, this is equally true of copper wire, or any of the ordinary materials that we deal with. Now, if we separate one of these electrons from the atom, one of these negative electrons from the atom, which you will notice is in this outer shell I spoke of, then the atom becomes positively charged, because we have removed a certain amount of the negative charge, which made it balanced or neutral. That negative electron which we removed exhibits certain effects that we are going to talk about. Now, you remember that when we separated the negative from the positive in the atom, we developed a measurable charge between them, because one becomes positively charged and the other is negatively charged. When the electron moves through a conductor or through space, it exhibits the thing which we call a flow of electric current. In other words, electric current, in a conductor, is the flow of electrons, or its equivalent; and when I say 'its equivalent,' I have got to tell you a little bit more. In other words, in a piece of copper wire, which is a conductor, we have packed a great many molecules and, of course, atoms. It is not known today whether or not an electron starts at one end of this conductor and passes all the way through the conductor, this same electron emerging from the other end, or whether the first electron knocks loose a second electron, and that knocks loose a third one, just as a group of billard balls hit by the first ball transmits its motion to the final ball. Actually, it makes no difference, because the result is the same, so far as we are concerned."

This witness further testified that, the generation of electricity is the processing of matter which is constructed from electrons in such a way as to separate the electrons in the atom. In the separated state the electrons in the atom begin to move because of a measurable change between electrons in a conductor of electricity: such a flow of electrons is electricity. Fuel for a steam driven plant or water for a fuel driven plant is necessary to provide the motive power necessary to separate the electrons in the atom in order to cause a flow of electrons in an electric conductor: that electricity "has mass or weight," and that electricity or its effects may be perceived by the senses. specifically, he testified that electricity may be tasted: that electricity may be detected by the sense of smell; that electricity may be perceived by touch; and that electricity may be used to produce X-rays and light.

All the expert witnesses agreed that the electricity generated by the transformer is new electricity or electric current generated upon the same principle as in the first instance by the use of the generator; that the electric current coming to a transformer does not pass through to the other side, but the use of the transformer changes the quantity of current on the opposite sides of the transformer. Exhibits were introduced to illustrate the operation of the transformer, as were photographs of a precipitron, which was explained by appellee's witness Wagner. The witness explained that by the use of such apparatus negative electrons might be made to adhere to smoke particles in such manner as to cause the smoke to be attracted by and deposited upon positive plates, thus preventing the smoke from issuing from the chimney-like opening in the preciptron.

Dr. Arthur St. C. Dunstan, Dean of Electrical Engineering Department of the Alabama Polytechnic Institute, a witness for appellant, testified, in effect, that the generation of electricity was the transforming or conversion of one form of energy "not ordinarily usable by the ordinary customer, into electric energy which can be used by the ordinary customer"; and which energy is distributed to the ultimate consumer. He termed the generation of electricity as the conversion of one form of energy into another. that electricity is already in existence; that the amount of it may not be changed; that we may not take from or add to the amount of it: that electricity when converted into use, is "usable energy," and that the electrons are already in the wire; that by the use of the generator, there is established an electric pressure: that such pressure, acting on the electrons, shoves them along the wire; that whether the same electrons go out at the other end of the wire in which they started may not be determined, but if two go in at one end, two will come out at the other end, although we may not see such electrons; that although no one has ever seen an electron and what it is is not known, it is assumed that there is such a thing as the electron, for the reason that such assumption explains the results of certain experiments; that all electrons are apparently exactly alike, and may not be made larger or smaller.

The question as to whether a public utility engaged in the production or generation, transmission and distribution of electricity is engaged in manufacturing has been presented to the courts from various angles and under different subjects and circumstances, with citation of many authorities. It was considered by this Court in the case of Beggs v. Edison Electric Illuminating Co., 96 Ala. 295, 11 So. 381, 383 38 Am.St.Rep. 94. The controversy arose over the right of the Edison Electric Illuminating Company and the Merchants Electric Light and Power Company, doing business in Birmingham, to consolidate under the provisions of section 1565, Code of 1886, which declares that "Any two or more mining, quarrying, or manufacturing corporations may unite and consolidate their capital stock, property and...