Lilienthal Tobacco v. United States

• Decision Date: 01 October 1877
• Citation: 24 L.Ed. 901,97 U.S. 237
• Parties: LILIENTHAL'S TOBACCO v. UNITED STATES
• Court: U.S. Supreme Court

97 U.S. 237

24 L.Ed. 901

LILIENTHAL'S TOBACCO v. UNITED STATES.

October Term, 1877

ERROR to the Circuit Court of the United States for the Southern District of New York.

This was an information filed by the United States, March 27, 1868, in the District Court for the Southern District of New York, for the condemnation and forfeiture of a quantity of manufactured tobacco, raw materials, and other personal property seized by the collector of internal revenue for the fourth collection district, March 25, 1868, at the tobacco manufactory of Christian H. Lilienthal, in the city of New York, for a violation of sect. 48 of the act of Congress approved June 30, 1864, entitled 'An Act to provide internal revenue to support the government to pay interest on the public debt, and for other purposes,' as amended by the act of July 13, 1866.

Lilienthal appeared, and claimed the property.

The questions which the case involves are presented in the following charge of the court to the jury:——

The issue in this case is a very plain one. The prosecution is founded on the forty-eighth section of the act of June 30, 1864, as amended by the ninth section of the act of July 13, 1866 (14 Stat. 111); a section enacted at a comparatively early day in the history of the internal-revenue acts of this country, and which has remained on the statute-book, with some modifications, ever since, and has been enforced in a great many cases. Its provisions are these: that where any property subject to a tax under a law of the United States is found in the possession of any person, with intent to sell it, or remove it, or dispose of it, without paying the tax upon it, or without having the tax paid upon it, or with intent to defraud the internal-revenue laws of the United States, such property so found under such circumstances in the possession of any person, with such intent, shall be forfeited to the United States, and may be seized, as this property was in this case, and be proceeded against in the manner in which this property is being proceeded against in this suit. The same section provides that if any raw materials are found in the possession of any person, he having the intent in respect to them, when they are so found in his possession, of manufacturing them into articles subject to tax, in respect to which articles he intends that the tax shall not be paid, or that the revenue shall be defrauded, such raw materials shall be forfeited to the United States. The same section goes on to provide that, under such circumstances, not only shall the articles subject to tax and the raw materials be forfeited, but all personal property, of any kind whatsoever, found on the same premises where such offending articles, so to speak, are found, shall be forfeited. There has been seized, in this case, not only tobacco in a manufactured state, subject to tax, but also a large quantity of raw materials,—raw tobacco and other raw materials, and a large quantity of personal property connected with this establishment. The report of the appraiser values the entire property at $104,000. In that amount it was bonded and delivered to the claimant, and the government accepted what it regarded as a satisfactory bond, in place of the property. It is this $104,000 worth of property, consisting generally of tobacco subject to tax, raw materials, and other personal property found in this establishment, that is the subject of this suit.

It is for the government to satisfy you that this property was in this establishment with the intent mentioned, in respect to it, on the part of those in whose custody and control it was. For the purpose of making the matter clearly definite, I will read the language of the statute:——

'All goods, wares, merchandise, articles, or objects on which taxes are imposed by the provisions of law, which shall be found in the possession or custody or within the control of any person or persons, for the purpose of being sold or removed by such person or persons in fraud of the internal-revenue law, or with design to avoid payment of said taxes, may be seized by the collector or deputy collector of the proper district, or by such other collector or deputy collector as may be specially authorized by the commissioner of internal revenue for that purpose, and the same shall be forfeited to the United States; and also all raw materials found in the possession of any person or persons intending to manufacture the same into articles of a kind subject to tax, for the purpose of fraudulently selling such manufactured articles, or with design to avoid the payment of said tax; and also all tools, implements, instruments, and personal property whatsoever in the place or building, or within any yard or enclosure, where such articles or such raw materials shall be found, may also be seized by any collector or deputy collector, and the same shall be forfeited as aforesaid.'

The district attorney has stated to you, in his summing up, the various grounds upon which he claims the forfeiture of the property seized; that is, the various grounds upon which he maintains that he has proved the existence of this intent, in respect to the taxable tobacco and the raw materials and other property seized in the factory of Lilienthal. As you have seen, the testimony is entirely testimony in regard to what are alleged to have been previous acts of omission and of commission on the part of Lilienthal and persons in his establishment, in respect to the conduct of their business at previous times in relation to the internal-revenue laws of the United States. This is a class of evidence which, as has been expressly adjudicated in many cases by the Supreme Court of the United States, is perfectly competent and legitimate evidence from which to infer a fraudulent intent in respect to existing property. It has been held, in respect to the importation of goods at the custom-house, that a fraudulent intent in respect to a particular importation of goods may be legitimately inferred by a jury from a previous fraudulent intent and previous fraudulent acts, shown in respect to property previously imported through the custom-house. There is a large class of cases on that subject, and the doctrine has been recently applied to an action under the internal-revenue laws by the circuit judge of this circuit, in a case in the northern district of New York in regard to distilled spirits. It is, therefore, a class of evidence that can be legitimately appealed to, and is appealed to, in all cases of this kind. Sometimes it is accompanied by other evidence, in respect to an existing intent, in regard to property seized. Sometimes property seized is found concealed; and to support the idea that fraud was intended in regard to it, previous fraudulent acts are given in evidence. Sometimes, as in this case, the evidence consists almost entirely of testimony in regard to previous acts and to what is claimed by the district attorney to have been the fraudulent intent existing in such previous acts.

I shall call your attention particularly to the various matters that are relied on by the district attorney. The first one is in regard to what is called 'extra long smoking-tobacco,' a species of tobacco in regard to which it may be generally stated that it has in it a very large proportion of stems. It is a kind of tobacco which, according to the evidence, was manufactured in this establishment, as a part of its ordinary business, prior to the 1st of August, 1866, at which date commenced this series of returns, seventeen in number, which are the main subjects of consideration in this case. It is a species of tobacco that was manufactured previous to that time, and returned month by month in the monthly returns. That date is taken in this case because it is the date when the act of July 13, 1866, changing the rate of duty on various descriptions of tobacco, went into operation. Previous to that time the act imposing a tax on tobacco was the act of March 3, 1865, 13 Stat. 469. That act of March 3, 1865, divided smoking-tobacco into two classes for taxation. One class, made exclusively of stems, was taxed fifteen cents a pound; and smoking-tobacco of all kinds, not included and provided for under the fifteen cents clause, was taxed thirty-five cents a pound. It appears from the evidence that the 'extra long smoking-tobacco,' so made in this establishment prior to Aug. 1, 1866, and so being made in it when the act of July 13, 1866, was passed, had been, up to the 1st of August, 1866, returned by Lilienthal as 'smoking-tobacco,' under this thirty-five cents clause, and not under the fifteen cents clause. Not being made exclusively of stems, it was not liable to the fifteen cents tax, and therefore it was liable to the thirty-five cents tax. It also appears that, for some twenty days or so after the 1st of August, 1866, when this new law, July, 1866, went into effect, this 'extra long smoking-tobacco,' which had before Aug. 1, 1866, been returned at thirty-five cents, was returned by Lilienthal as liable to a tax of forty cents, under a clause in the act which so went into effect Aug. 1, 1866, and was returned by him under the head of 'chewing-tobacco.' The reason stated by the claimant for returning such tobacco as 'chewing-tobacco' is, that there was no place to insert it in the form of return, except under the head of 'chewing-tobacco.' It had, however, been previously returned as 'smoking-tobacco,' and it was called 'smoking-tobacco' in the price-list issued by the claimant. After it had been returned for some twenty days after the 1st of August, 1866, as liable to a tax of forty cents a pound, it was at all times thereafter returned by the claimant as liable to a tax of fifteen cents a pound; it was continued at that rate throughout all the returns, down to the 31st of December, 1867, and all the smoking-tobacco of every kind that was returned by the claimant in all the returns made by him...