Electric Storage Battery Co. v. McCaughn, 14008.

• Decision Date: 28 April 1931
• Docket Number: No. 14008.,14008.
• Citation: 52 F.2d 205
• Parties: ELECTRIC STORAGE BATTERY CO. v. McCAUGHN, Formerly Collector of Internal Revenue.
• Court: U.S. District Court — Western District of Pennsylvania

52 F.2d 205 (1931)

ELECTRIC STORAGE BATTERY CO. v. McCAUGHN, Formerly Collector of Internal Revenue.

No. 14008.

District Court, E. D. Pennsylvania.

April 28, 1931.

Charles C. Norris, Jr., of Philadelphia, Pa., for plaintiff.

Paul Freeman, Asst. U. S. Atty., of Philadelphia, Pa., and E. F. McMahon, Sp. Atty., Bureau of Internal Revenue, of Washington, D. C., for defendant.

KIRKPATRICK, District Judge.

This is an action at law tried to the court without a jury for the recovery of $973,532.57, with interest, being the amount of manufacturers' excise taxes paid by the plaintiff between July 22, 1922, and April 1, 1926.

The taxes were assessed and collected under subdivision 3 of section 900, tit. 9 of the Revenue Act of 1921 (42 Stat. 291), and under subdivision 3 of section 600, tit. 6 of the Revenue Act of 1924 (26 USCA § 881 note). The portions of the two acts material to the issue in this suit are identical. The language is:

"* * * There shall be levied, assessed, collected, and paid upon the following articles sold or leased by the manufacturer * * * a tax * * * (1) Automobile truck chassis and automobile wagon chassis. * * *

"(2) Other automobile chassis and bodies and motor cycles * * * except tractors.

"(3) * * * Parts, or accessories for any of the articles enumerated in subdivision (1) or (2), sold to any person other than a manufacturer or producer of any of the articles, enumerated in subdivision (1) or (2). * * *"

The plaintiff admits that during the period in question it made electric storage batteries and sold them to persons other than manufacturers of automobiles, and the question involved in this suit is whether those batteries were parts for automobiles.

It appears from the evidence that electric storage batteries are of a great many different sizes and types. Some of them (the submarine batteries for example) stand four or five feet high; others are not much bigger than the palm of the hand. Obviously, such batteries could not possibly be parts for automobiles. Other types are of a size and capacity perfectly adapted to use upon automobiles and are so used. Moreover, it was conceded that the plaintiff during the taxable period published an "Index" which it distributed to its customers in which it specified the particular type of battery of its manufacture which it recommended for each of the various makes of automobile then in existence. However, as to the specific articles upon the sale of which the taxes were imposed, beyond the fact that they were electric storage batteries, there is no evidence as to their characteristics or what they were ultimately used for.

Since the suit is to recover taxes alleged to have been erroneously exacted, the burden of proof is upon the plaintiff to show facts establishing the invalidity of the taxes. United States v. Anderson, 269 U. S. 422, 423, 46 S. Ct. 131, 70 L. Ed. 347; Botany Worsted Mills v. United States, 278 U. S. 282, 289, 290, 49 S. Ct. 129, 73 L. Ed. 379; Reinecke v. Spalding, 280 U. S. 227, 233, 50 S. Ct. 96, 74 L. Ed. 385. Hence, in the absence of proof to the contrary, it must be assumed that the articles upon the sale of which these taxes were collected were electric storage batteries of one of the types adapted to installation upon automobiles (an example of which is the plaintiff's 3-XC-13-1 battery, in evidence as Plaintiff's Exhibit 5). It may be further assumed, if the fact has any value, that the batteries sold were actually used for automobiles. If this were not so, it was for the plaintiff to show it. See Perfection Gear Co. v. United States (Ct. Cl.) 41 F.(2d) 561.

These considerations make it unnecessary to consider a large amount of the plaintiff's testimony intended to show that various other types of batteries can be used just as well or better for other purposes than automobile installations. Thus, there was in evidence, as Defendant's Exhibit 1, a type of battery made by the plaintiff and called by it a radio battery. This battery is of slightly different construction from the batteries advertised for use upon automobiles. Not being intended to meet the high discharge rate required in starting automobiles, it was possible to make it so that it would have a longer life. The defendant's answer to all this could properly be: "There is no evidence that any of the batteries taxed were radio batteries. If any were you have failed to show it."

The burden upon the plaintiff is therefore to show that the batteries, the sale of which was taxed, were not parts for automobiles although capable of use as such, and at this point we inquire what facts it must establish in order to meet this burden.

In the Universal Battery Company v. United States, 281 U. S. 580, 50 S. Ct. 422, 423, 74 L. Ed. 1051, the Supreme Court had occasion to construe the section of the Revenue Act of 1921 involved in this case. The court referred to the administrative regulations issued by the Bureau of Internal Revenue under section 900 and adhered to for a period of ten years, which construed the term "part" as meaning any particle designed or manufactured for the special purpose of being used as, or to replace, a component part of a motor vehicle, and which by reason of some characteristic is not such a commercial article as ordinarily would be sold for general use, but is primarily adapted for use as a component part of such vehicle. The court said that this was an admissible construction of the act and went on to say: "Certainly it would be unreasonable to hold that articles equally adapted to a variety of uses and commonly put to such uses, one of which is use in motor vehicles, must be classified as parts or accessories for such vehicles. And it would be also unreasonable to hold that articles can be so classified only where they are adapted solely for use in motor vehicles and are exclusively so used. Magone v. Wiederer, 159 U. S. 555, 559, 16 S. Ct. 122, 40 L. Ed. 258. We think the view taken in the administrative regulations is reasonable and should be upheld. It is that articles primarily adapted for use in motor vehicles are to be regarded as parts or accessories of such vehicles, even though there has been some other use of the articles for which they are not so well adapted."

The rule thus stated and the application of it to the five cases dealt with by the court in the ensuing portions of the opinion leave no doubt as to what the plaintiff must show in order to establish the illegality of the assessments against it. The test is whether the articles are primarily adapted for use in automobiles. That does not mean adapted solely for such use or exclusively so used. On the other hand, they will be held to be primarily adapted to such use, even though there has been or is some other use made of them, if they are not so well adapted to such other use. But, if they are "equally adapted to a variety of uses and commonly put to such uses," they cannot be said to be primarily adapted for use in motor vehicles.

The plaintiff here meets the issue by undertaking to prove that the type of batteries which is adapted to use in automobiles is equally well adapted to a variety of other uses and is commonly put to such other uses.

Although much evidence was produced which showed that, where exactly the same duty was required of two batteries in two different kinds of use, the same battery would be equally well adapted to either, this did not by any means establish the plaintiff's proposition, because it still remained to show that there were different uses for the type in question which called for exactly the same duty. But there was proof that the starting or cranking of all internal combustion engines of the same size calls for substantially the same duty from the battery, and that, where the type of lighting in use in automobiles and motorboats is also required, that duty is secondary and need not affect the construction of the battery. There are also various requirements as to size, weight, portability, and price, but I think the evidence sufficiently shows that these requirements are the same in the cases of automobiles, motorboats, and starting batteries for farm lighting.

As a matter of fact, the identical types of batteries sold and advertised by the plaintiff for use in automobiles are also sold and advertised by it for use in motorboats in connection with marine engines, and when so used they are installed without the slightest change or adaptation. There is no definite testimony as to the extent of such use (except that an estimate of the number of vessels propelled by internal combustion engines was given). It is, of course, not nearly so wide as the use upon automobiles, but common knowledge tells us that it is far too extensive to be classified as exceptional, extraordinary, or incidental. There is also evidence that these same batteries, without change, have been sold in considerable numbers for use as starting batteries in one type of farm electric light installation. This evidence is really undisputed, and I therefore conclude that, since there are extensive uses other than in connection with automobiles to which the batteries commonly used on automobiles are equally well adapted, such batteries are not parts of automobiles within the meaning of the Revenue Acts.

It may be true, as is contended by the government, that this construction will leave very few articles taxable as parts of automobiles. That consideration, however, is not for this court, but may well be assumed to have been before the Supreme Court when the rule was laid down in Universal Battery Co. v. United States, supra. Our duty as we conceive it is to apply that rule with as nearly mathematical accuracy as possible.

The conclusion reached in this case is the same as that reached by Judge Dickinson, on a somewhat broader line of reasoning, in the case of the Philadelphia Storage Battery Co. v. Lederer (D. C.) 21 F.(2d) 320. It was only because the Supreme Court...