MCCAUGHN V. HERSHEY CHOCOLATE CO.
| Decision Date | 18 May 1931 |
| Citation | 283 U. S. 488 |
| Court | U.S. Supreme Court |
CERTIORARI TO THE CIRCUIT COURT OF APPEALS
FOR THE THIRD CIRCUIT
1. "Sweet chocolate" and "sweet milk chocolate," which contain sugar in addition to chocolate or chocolate and milk solid, and which are widely known, distributed, and used as confectionery, are "candy" within the meaning of §§ 900(9), Revenue Act of 1918 and 900(6), Revenue Act of 1921, imposing excise on the sales price of candy and other luxuries. P. 490.
2. Administrative construction of a doubtful statute will not be lightly disturbed. P. 492.
3. Reenactment of a statutory provision without change in the face of a consistent administrative construction is persuasive of a legislative recognition and approval of the statute as construed. Id.
42 F.2d 408 reversed.
Certiorari, 282 U. S. 827, to review judgments which reversed judgments in favor of the above-named collectors in suits in the district court for recovery of money collected as taxes.
Section 900 of the Revenue Act of 1918, 40 Stat. 1057, 1122, imposed at varying percentages, an excise tax upon
the sales price of enumerated articles, most of which may be characterized as luxuries. The enumeration of the ninth subdivision was, "Candy, 5 percentum." Section 900(6) of the Revenue Act of 1921, 42 Stat. 227, 292, reenacted this provision but reduced the tax to 3 percent. Respondents, manufacturers of "sweet chocolate" and "sweet milk chocolate," brought suits in the district court for Eastern Pennsylvania, to recover about ,000,000 of taxes assessed under these sections for the years 1918 to 1924, on the ground that the articles sold are not "candy," sale of which was taxed. On written stipulation of the parties, the cases were tried by the court without a jury. Judgments for petitioners were reversed by the Court of Appeals for the Third Circuit. 42 F.2d 408. This Court granted certiorari, 282 U. S. 827, to resolve the conflict of the decision below with that of the Court of Appeals for the First Circuit in Malley v. Walter Baker & Co., 281 F. 41.
The trial court found that sweet chocolate is a solid or plastic mass, made by mixing sugar with chocolate, which is the powdered cacao nib or bean, with or without the addition of flavoring material, and that sweet milk chocolate also contains milk solids; that the type of sweet chocolate manufactured and sold by respondents is commonly sold in small bars, sometimes containing nuts, or in blocks, "attractively dressed up" for sale under names which would appeal to candy consumers, and is usually consumed in the same manner as candy -- that is, eaten in small quantities from the hand as a sweetmeat. One of the respondents described its product as a "confection" upon some of its labels and display matter.
Respondents rest their case mainly upon differences in composition of sweet chocolate from that of confectionery, made principally of sugar or molasses, with or without the addition of coloring or flavoring matter, which, it is urged, is alone described by the word "candy." They
assert that chocolate is food, and candy is not, and hence chocolate cannot be properly described as candy. But it is common knowledge that sugar, also a food, is an ingredient both of candy as thus defined and of sweet chocolate, sometimes to the extent of 50 percent or more of the latter, as was conceded on the argument here. We likewise know, as was conceded, that chocolate in a great variety of forms is an important ingredient of what is commonly known as candy, and that pieces of sweet chocolate of the type described by the findings are often included in packages of confectionery commonly sold as candy. These considerations at least suggest that the form and use of sugar compounds, intended for taste gratifying consumption, are quite as important in determining whether they are candy as their particular composition. See Malley v. Walter Baker & Co., supra, p. 46.
No doubt the word "candy," in view of its use to designate confections made principally of sugar before the widespread consumption of sweet chocolate preparations as confections or sweetmeats, and as the dictionary suggests, may be used in this narrower and more restricted sense. But it may be, and we think is, used, as the dictionary also suggests, in a popular and more general sense, as synonymous with sugar compounds sold and used as confectionery or sweetmeats, and embraces them as well as candy made chiefly of sugar.
If it were necessary to our decision, in the absence of any controlling legislative history or any suggested plausible reason why a tax on candy, in a general revenue measure taxing luxuries, should be deemed to apply to one type of confectionery and not the other, we should hesitate to say that the word was used in its restricted sense, or to hold that a substance made of sugar and chocolate, a widely known and popular form of confectionery identified, in use and method of distribution, with other
types of confectionery known as "candy," was not intended to be taxed. See DeGanay v. Lederer, 250 U. S. 376, 381; Van Camp & Sons v. American Can Co., 278 U. S. 245, 253.
Possible doubts as to the proper construction of the language used should be resolved in the light of its administrative and legislative history. Shortly after the adoption of the 1918 Act, Art. 22 of Regulations 47, May 1, 1919, announced that "Candy within the meaning of the act includes . . . sweet chocolate and sweet milk chocolate, whether plain or mixed with fruit or nuts." This continued to be the ruling of the Treasury Department until the repeal of the tax by § 1100(a) of the Revenue Act of 1924, 43 Stat. 253, 352. It and later regulations excluded unsweetened chocolate from the tax and, as revised in December, 1920, the regulation, and also Article 19 of Regulations 47, January 6, 1922, under the 1921 Act, excluded from the tax all sweet chocolate which obviously would not be consumed in the condition or form in which sold. This was...
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