Katz Underwear Co. v. United States, Civil Action No. 434.
| Decision Date | 17 July 1941 |
| Docket Number | Civil Action No. 434. |
| Citation | 39 F. Supp. 976 |
| Parties | KATZ UNDERWEAR CO. v. UNITED STATES. |
| Court | U.S. District Court — Western District of Pennsylvania |
Charles H. Welles, 3d, of Scranton, Pa., Lester R. Male, of Honesdale, Pa., and Prew Savoy, of Washington, D. C., for plaintiff.
Samuel O. Clark, Jr., Asst. Atty. Gen., Andrew D. Sharpe and Frederic G. Rita, Sp. Assts. to Atty. Gen. and Frederick V. Follmer, U. S. Atty., and Joseph P. Brennan, Asst. U. S. Atty., both of Scranton, Pa., for the Government.
This action was brought to recover from the United States the sum of $9,913.40 paid by the plaintiff as Floor Stocks Taxes and interest under the Agricultural Adjustment Act of May 12, 1933, 7 U.S.C.A. § 601 et seq. The case came on for hearing and, from the evidence, the Court finds the facts to be as follows:
Findings of Fact.
1. The plaintiff is a Pennsylvania corporation having its principal office and place of business at Honesdale, Pennsylvania.
2. The defendant is the United States of America.
3. The plaintiff paid a cotton floor stocks tax and interest, under the Agricultural Adjustment Act, to the United States of America in the sum of $9,913.40 during the years 1933 and 1934.
4. Claim for the refund of the tax was filed January 9, 1937, with the Commissioner of Internal Revenue.
5. Notice of the rejection of the claim for refund was sent by registered mail January 24, 1939.
6. This action was instituted April 26, 1940.
7. The plaintiff increased the prices of some of its products effective August 1, 1933, and increased the prices of some of its products after August 1, 1933, effective during the balance of the period from August 1, 1933, to December 31, 1933.
8. There was not evidence from which it could be found that the plaintiff sustained the burden of the tax here involved.
Discussion.
The Act under which the tax was collected was invalidated by the decision of the United States Supreme Court in the case of United States v. Butler, 297 U.S. 1, 56 S.Ct. 312, 80 L.Ed. 477, 102 A.L.R. 914. Following that decision, Sec. 901 of the Act of June 22, 1936, c. 690, 49 Stat. 1747, 7 U.S.C.A. § 623 note, repealed those portions of the Agricultural Adjustment Act relating to the processing taxes. Section 902 provides that: "No refund shall be made or allowed, * * * of any amount paid by or collected from any claimant as tax under the Agricultural Adjustment Act this chapter, unless the claimant establishes to the satisfaction of the Commissioner * * * or to the satisfaction of the trial court, or the Board of Review * * * (a) That he bore the burden of such amount and has not been relieved thereof nor reimbursed therefor nor shifted such burden, directly or indirectly, * * *." 7 U.S.C.A. § 644.
It is clear that the burden was upon the plaintiff to establish to the satisfaction of the trial court that it bore the burden of the tax. To meet that burden the evidence offered by the plaintiff was for the most part extremely confusing and contradictory.
The plaintiff showed that, during the severe flood in this region in 1936, most of its records were washed away. The records which were still available consisted in part of "estimate tickets" upon which the plaintiff computed its costs and fixed the prices of the various articles which it sold. The estimate tickets which dealt with the articles sold from August 1, 1933, to December 31, 1933, were started in February, 1933, and completed some time prior to July 1, 1933. The plaintiff did not have its records which disclosed the prices at which the various articles were actually sold, except that Edward A. Katz, treasurer of the plaintiff company, testified that all sales were made at the prices quoted on the estimate tickets. As a result of the loss of its records, much of plaintiff's evidence was based upon its estimate tickets. In this regard, it should be noted that, while the plaintiff's explanation of its failure to produce its records has been accepted by the Court and no unfavorable inference may be drawn from such failure to produce, yet plaintiff's burden of proof has not been lessened thereby and the plaintiff must establish "to the satisfaction of the trial court" that it did sustain the burden of the tax.
The plaintiff's chief witness, Edward A. Katz, testified on the first day of the trial that there had been no change in prices of and quantity of material in the articles of the Plaintiff's line on August 1, 1933, as compared with the prices of and quantity of material in the articles of plaintiff's line sold prior to August 1, 1933. The following day, Mr. Katz testified that there had been price increases effective August 1, 1933, in the total sum of $1,400, and that there had been substantial increases in the quantity of material used to make up the various articles.
The plaintiff offered evidence to show that its total sales for the year from August 1, 1933, to July 31, 1934, amounted to approximately $1,000,000. The plaintiff offered further evidence to show that its net profit for that year was $5,009.81, and that, during the preceding year from August 1, 1932, to July 31, 1933, with approximately the same total sales the plaintiff's net profit was $16,501.39. This evidence as to the drop in net profit of $11,491.58 was offered for the purpose of showing that the plaintiff sustained a net loss in profit in excess of the tax. From this evidence the Court is asked to...
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Katz Underwear Co. v. United States, 7866.
...it in 1933 and 1934. The District Court for the Middle District of Pennsylvania denied recovery and entered judgment for the defendant. 39 F.Supp. 976. The conditions which must be met by a claimant for refund of taxes collected under the Agricultural Adjustment Act are set forth in Section......