Higgins Mfg. Co. v. Page

Citation297 F. 644
Decision Date15 April 1924
Docket Number1548.
PartiesHIGGINS MFG. CO. v. PAGE, Collector.
CourtUnited States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Rhode Island

Wilson, Churchill & Curtis and Alexander L. Churchill, all of Providence, R.I., for plaintiff.

Harold A. Andrews, Asst. U.S. Atty., of Providence, R.I., for defendant.

BROWN District Judge.

This is an action for the recovery of the sum of $16.50 paid, under protest, as a tax, at the rate of 10 cents per pound upon 165 pounds of a product known as 'Nut-Z-All,' a compound containing no animal fats or butter fats, but composed of cocoanut oil, peanut oil, salt, and artificial coloring matter which gives it a shade of yellow.

The formula for this compound was devised by Mr. Herbert J Higgins, then president of the 'Nut Grove Butter Company,' predecessor to the Higgins Manufacturing Company, who submitted his formula and a sample made in accordance therewith to the Acting Commissioner of Internal Revenue at Washington, with a request for a ruling or opinion whether it came under the oleomargarine statutes. The Acting Commissioner agreed to make an analysis and to inform him later, and later the following letter was received:

Treasury Department.

Washington January 20, 1922. Office of Commissioner of Internal

Revenue. Address reply to Commissioner of Internal Revenue and refer to M--FJA-- 101

Nut Grove Butter Company, Providence, R.I.-- Sirs: Reference is made to your letter of January 6, containing a formula for a compound which you intend to manufacture and in which you request to be advised whether or not this product will be taxable as oleomargarine.

In reply you are informed that an analysis of the sample submitted shows that the product does not resemble butter in flavor, body texture, or appearance. If the product under consideration is placed on the market in good faith as a lard substitute or cooking compound, its constituent parts remaining the same as in the case of the sample submitted and examined, and the mode of advertising and packing is such as not to mislead the consumer into the belief that the product is a butter substitute, then said product will not be taxable as oleomargarine. If, however, the mode of packing or advertising this product would be such as to mislead the consumer into the belief that he was receiving a butter substitute, this ruling would be revoked and the product held subject to the tax as oleomargarine.

Respectfully,

(Signed) D. H. Blair, Commissioner.

A true copy. Attest: The analysis which is referred to in the letter was made under the supervision of W. D. Linder, Chief Chemist, Bureau of Internal Revenue, by George F. Byer, Chemist.

Though the letter states that the product 'does not resemble butter in flavor, body, texture or appearance,' the United States now relies upon the oral testimony of Mr. Linder and Mr. Byer to prove that the product should be classified as oleomargarine, subject to a tax of 10 cents per pound.

On or about December 1, 1922, the plaintiff was advised by the defendant to the effect that the Commissioner had arrived at a conclusion contrary to that stated in the letter, and that the plaintiff's product, except that already on hand, would be taxable at 10 cents per pound.

The first question is whether this product is within the definition of the term 'oleomargarine' contained in section 2, Act of August 2, 1886 (24 Stat. 209 (Comp. St. Sec. 6216)):

'That for the purposes of this act certain manufactured substances, certain extracts, and certain mixtures and compounds, including such mixtures and compounds with butter, shall be known and designated as 'oleomargarine,' namely: All substances heretofore known as oleomargarine, oleo, oleomargarine oil, butterine, lardine, suine, and neutral; all mixtures and compounds of oleomargarine, oleo, oleomargarine oil, butterine, lardine, suine, and neutral; all lard extracts and tallow extracts; and all mixtures and compounds of tallow, beef fat, suet, lard, lard oil, vegetable oil annotto, and other coloring matter, intestinal fat, and offal fat made in imitation or semblance of butter, or when so made, calculated or intended to be sold as butter or for butter.'

Does the statute apply to mixtures and compounds of vegetable oils free from animal fats?

By the punctuation of the statute there appears the term, 'vegetable oil annotto.' The plaintiff contends that this term means annotto in an oil solution. It relies upon the testimony of Prof. F. P. Gorham, of Brown University, that as a coloring matter for oleomargarine, butter, and the like, it was always used dissolved in vegetable oil. He testified:

Q. 58. Whether or not it is possible to use it, practicably to use it as a coloring matter in oleomargarine, butter and kindred products, unless it is dissolved in whole in vegetable oil?

Ans. It would be impossible to get the color mixture.

Q. 59. And industrially it has always been used in that fashion, oleomargarine and kindred products, since the time before 1886?

Ans. It has, yes.

William D. Linder, Chief Chemist, Bureau of Internal Revenue, testified that annotto is ground in cotton seed oil or sesame oil, vegetable oils--

C. Q. 51. How it was used in oleomargarine for quite a period back, your study embraced that?

Ans. I think it has always been used ground in oil.

C. Q. 52. It has been one of the distinctive coloring matters, annotto, has it not?

Ans. It has been used for years in coloring fats, oils.

C. Q. 53. It has been well known in the trade as a coloring matter?

Ans. Oh, yes.

C. Q. 54. Known commercially all over the United States for years as a coloring matter for oleomargarine?

Ans. Yes.

C. Q. 55. And that has always been in a solution of oil?

Ans. I never found it anything else.

C. Q. 56. And that, using it in that fashion, antedated 1886, did it not?

Ans. I expect it did; I am not able to quote any literature on that, but I have no doubt that has always been used, used in coloring oil and fats.

On the brief for the United States it is stated that annotto, when prepared in oil, is subject to duty as an oil. See Summary of Tariff Information 1921, p. 1236, and Decision of Board of General Appraiser No. 19944, T.D. 29339.

There is no evidence that the term, 'vegetable oil annotto,' was in ordinary use before the enactment of the statute, though it appears that there was in the market a preparation of annotto in oil that might be so described.

Counsel for the United States contends that the court should read the statute as if a comma were inserted between the words 'vegetable oil' and 'annotto,' thus, 'vegetable oil, annotto, and other coloring matter.'

The effect of inserting the comma would be to make vegetable oil, enumerated in the statute, one of the normal ingredients or substances.

Reading it as originally punctuated, 'vegetable oil annotto' becomes merely a coloring matter. By inserting a comma, the statute has a much broader scope, and covers under the term 'vegetable oil' a large class of ingredients, some of which, like cocoanut oil, were not in use at the date of the statute.

It is in evidence that compounds in which no animal fats or oils or butter fats were used first came on the market about 10 years ago, or about 17 years after the passage of the act.

The plaintiff argues that the act does not cover an entirely new commercial product not known or manufactured at the time of the passage of the act.

It is admitted in the brief for the United States that oleomargarine and butter substitutes composed entirely of vegetable oils, salt, and vegetable coloring matter were unknown at the time of the passage of the original act; but it is contended that nevertheless the plaintiff's product is composed of the statutory ingredients, as defined in section 2 of the act, i.e. vegetable oil. All ingredients other than 'vegetable oil annotto, and other coloring matter,' named in the act, are animal products.

It is in evidence, however, that vegetable oils, e.g. cotton seed oil, oil of sesame, mustard oil, were then used in the manufacture of oleomargarine.

The defendant's contention that 'vegetable oil' is not one of the natural or substantial ingredients of oleomargarine is not new, however.

In Moxley v. Hertz, 216 U.S. 344, 30 Sup.Ct. 305, 54 L.Ed. 510, the Solicitor General argued:

'The true distinction between natural and artificial colorants is unconnected with the statutory enumeration and must be discovered in the real nature of oleomargarine itself as universally recognized and not altered by statute, or in the natural relation of the colorant to the end (butter color) sought to be accomplished. By this test, oleomargarine is an article manufactured from animal fats; and a vegetable oil is a foreign, and so artificial, addition to it just as much as if it were not named in the statute. * * * The only ingredients which can be considered natural to oleomargarine are the animal (including butter) fats, and the only natural colorant is butter itself.'

In Cliff v. United States, 195 U.S. 159-163, 25 Sup.Ct. 1, 49 L.Ed. 139, it is apparent that it was assumed by both parties that vegetable oil was one of the ingredients or substances named in section 2, but the section, as quoted, had different punctuation whereby vegetable oil was separated from annotto.

I do not find that this question of punctuation has been raised before, but I doubt the intention of Congress to coin a new term, 'vegetable oil annotto,' though it is not improbable that both vegetable oil and annotto were enumerated as colorants rather than substantial elements of the compounds.

The next inquiry, necessary to determine whether the defendant's product comes within the statutory definition of oleomargarine, is:

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6 cases
  • Martin v. Andrews
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • November 15, 1956
    ...of the Revenue Act of 1951, c. 521, 65 Stat. 452, 26 U.S.C.A. (I.R.C.1939) § 3403. 9 Two of these decisions are reported: Higgins Mfg. Co. v. Page, D.C.R.I., 297 F. 644; Higgins Mfg. Co. v. Page, D.C. R.I., 20 F.2d 10 This is disclosed in the opinion of the Court of Appeals in that case. Mi......
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    ...About seven years earlier another manufacturer prevailed over the Collector of Internal Revenue in a case reported as Higgins Mfg. Co. v. Page, D.C.R.I.1924, 297 F. 644; The Rhode Island District Court found that Higgins' product was not oleomargarine or taxable as such. As a result the Com......
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