Eastman Kodak Company v. United States

• Decision Date: 19 July 1961
• Docket Number: No. 296-60.,296-60.
• Citation: 292 F.2d 901,155 Ct. Cl. 256
• Parties: EASTMAN KODAK COMPANY v. UNITED STATES.
• Court: U.S. Claims Court

155 Ct. Cl. 256, 292 F.2d 901 (1961)

EASTMAN KODAK COMPANY v. UNITED STATES.

No. 296-60.

United States Court of Claims.

July 19, 1961.

Richard B. Barker, Washington, D. C., for plaintiff. Joseph E. McAndrews and Ivins, Phillips & Barker, Washington, D. C., were on the brief.

George Willi, Washington, D. C., with whom was Louis F. Oberdorfer, Asst. Atty. Gen., for defendant. James P. Garland, Lyle M. Turner and Cynthia Holcomb, Washington, D. C., were on the briefs.

MADDEN, Judge.

The plaintiff sues for the refund of a part of the manufacturers' excise taxes which it paid when it sold its manufactured products to its dealers during the year 1954. During the latter months of 1954 the plaintiff distributed to its dealers certain advertising materials relating to the products which the dealers had bought from it. The plaintiff asserts that the cost to it of these advertising materials which it furnished, presumably gratis, to its dealers, constituted a price readjustment, analogous to a refund to the dealers of a part of the price they had paid the plaintiff. It says that it, therefore, became entitled to a refund of a part of the excise taxes which it had paid, which were based on the selling price of the products and did not take into consideration the cost of the advertising materials.

Section 3443(a) (2) of the Internal Revenue Code of 1939, 26 U.S.C. (1952 ed.) § 3443(a) (2), provides for a proportionate refund of manufacturers' excise taxes paid, if, after the sale, there has been a readjustment of the sale price. The defendant has moved to dismiss the plaintiff's petition on the ground that the plaintiff did not file a claim for refund within the four-year period prescribed by section 3313 of the 1939 Code, 26 U.S.C. (1952 ed.) § 3313. In its consideration of the instant motion the court does not, of course, consider the merits of the plaintiff's theory of recovery.

The expenditures upon which the plaintiff bases its asserted right to recover were, as we have seen, made in the last five months of 1954. The taxes which it seeks to recover were paid during those same months.

Section 3313 of the Internal Revenue Code of 1939, provides that all claims for refund of "any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty alleged to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected" except certain kinds of taxes not involved in this suit, must be filed within four years next after the payment of the tax. And section 3772, 26 U.S.C. (1952 ed.) § 3772, says in similar language that no suit may be brought in any court for the recovery of any such internal revenue tax until a claim for refund has been filed with the Commissioner, "according to the provisions of law in that regard."

On July 22, 1960, the plaintiff filed with the Commissioner a claim for refund of the taxes paid in 1954. Four days later, on July 26, the plaintiff filed its petition in this court. As we have seen, section 3313 fixes a period of four years. If section 3313 is applicable, the plaintiff's suit must fail, because section 3772 says that a taxpayer may not sue unless he has filed a claim for refund "according to the provisions of law in that regard." The provisions of law would, of course, include the provision as to the time within which the claim for refund must be filed.

The plaintiff says that section 3313, which requires the filing of the claim for refund within four years is not applicable. The asserted reason is that that section, according to its words, applies only to taxes "alleged to have been erroneously or illegally assessed or collected." The plaintiff says that its taxes were properly and rightly assessed and collected at the time it sold its products and paid the taxes, and that only the subsequent event, its expenditure for advertising materials, caused it to be entitled to a refund of a part of the taxes paid.

If section 3313 making the timely filing of a claim for refund a condition precedent to suit, is not applicable, the plaintiff says that its position is that of having a right, given to it by section 3443, of getting a tax refund because of a readjustment of the sale price of its products, which right it may enforce in this court without any prerequisite presentation to the Commissioner of Internal Revenue. It says it is suing upon a claim "founded upon an Act of Congress," 28 U.S.C. § 1491, and that the period of limitation for such a suit is, under 28 U.S.C. § 2501, six years.

If sections 3313 and 3772, the former setting the time on the filing of claims for refund, and the latter making a timely claim for refund a prerequisite to suit, are taken literally, neither is applicable to the plaintiff's situation because both of them speak of taxes "erroneously or illegally assessed or collected." We think that taking these sections literally would be disruptive of good order in the interpretation and Administration of the tax statutes.

(1) From the tax statutes as a whole, it seems evident that Congress desires that claims for refund of taxes should be presented to and considered by the administrative officers in charge of taxes, before the Government is haled into court. Yet if section 3772 is not applicable to a claim such as the instant one, there is no requirement that a claim for refund be presented to the tax authorities. In the instant case a claim for refund was filed, but it was not filed until four days before the suit was filed, and its filing was obviously only a gesture. The importance of the claim for refund is well known to this court. In many cases there has been vigorous litigation, not only with regard to the timely filing of a claim for refund, but with regard to whether the claim filed was sufficiently pointed and informative to give the administrative authorities a fair opportunity to consider the claim later asserted in court. See e. g., United States v. Andrews, 302 U.S. 517, 58 S.Ct. 315, 82 L.Ed. 398; Caldwell Sugars, Inc. v. United States, 54 F.Supp. 544, 101 Ct.Cl. 395, 412.

(2) The jurisdiction of the District Courts over tax refund suits is defined by 28 U.S.C. § 1346(a) (1). That section provides District Court jurisdiction of actions

"for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal-revenue laws."

This language is identical with that of sections 3313 and 3772. If the latter sections are interpreted to exclude situations where a tax was correct when paid but became excessive upon the happening of a later event, it would follow that the jurisdiction of the District Courts is similarly limited.¹ Accordingly, the District Courts would not have any jurisdiction at all over suits such as the one we are here considering, except their jurisdiction, under the Tucker Act, of claims of $10,000 or less. But is it clear that section 1346 was intended to confer tax refund jurisdiction on the District Courts completely concurrent with this court's jurisdiction. In 1954, when Congress eliminated from section 1346 the $10,000 limitation on tax refund suits in the District Courts, the House Committee which considered the change in section 1346 indicated that its aim was to establish exact concurrence of tax-refund jurisdiction between this court and the District Courts. See H.R.Rep.No. 659, 83d Congress, 2nd Sess. (1954), 2 U.S. Code Cong. & Ad.News (1954) 2716, 2717.²

We think the way out of the impasse is to give to the language "erroneously or illegally assessed or collected," which language is used in the three sections of the Code discussed above, an interpretation which will make the sections compatible with each other and with the orderly administration of the tax laws. We therefore hold that taxes become "erroneously * * * collected" even though, when paid, they were due and owing, if thereafter, by reason of a readjustment of price, or a retroactive tax reduction statute, or a recomputation of profits by renegotiation, the taxpayer becomes legally entitled to get them back. From that time, he must be alert to his rights, as other taxpayers must be, and must, within the rather generous periods provided by the statutes, file his claim with the tax authorities. Such claims, if well founded, will, presumably, be administratively paid and will never become the subjects of suits. If they are rejected, the law provides for the time within which they may be taken to court.

Our decision in Westinghouse Electric Corp. v. United States, 140 F.Supp. 565, 135 Ct.Cl. 119, is directly in point and is contrary to what we hold here.³ We are asked by the defendant to overrule Westinghouse. Upon a careful reconsideration of the problem, we have reached the conclusion that the defendant's position is correct, and that the decision in Westinghouse must be overruled. Our conclusion is based upon a reexamination of the meaning of sections 3313 and 3772 in the light of the Congress' purpose in enacting them, and also of another statutory provision which uses identical language. We also think it important that several recent decisions of this court have had the effect of substantially overruling the Westinghouse case, sub silentio, and that other courts have applied section 3772 in closely analogous situations.

This court has, in its decisions since Westinghouse, treated section 3772 (or its successor in the 1954 Code, section 7422(a), 26 U.S.C. (1958 ed.) § 7422(a) as applicable in situations where taxes became excessive after payment. In Verckler v. United States, Ct.Cl.1959, 170 F.Supp. 802, the court was confronted with a suit under a retroactive statute enacted after the plaintiff had paid its taxes. The Government's sole defense was based on ...