Miller v. Standard Nut Margarine Co of Florida Rose v. Same

Decision Date15 February 1932
Docket NumberNos. 251 and 252,s. 251 and 252
Citation284 U.S. 498,76 L.Ed. 422,52 S.Ct. 260
PartiesMILLER, Collector of Internal Revenue, v. STANDARD NUT MARGARINE CO. OF FLORIDA. ROSE, Collector of Internal Revenue, v. SAME
CourtU.S. Supreme Court

The Attorney General and Mr. Whitney North Seymour, of Washington, D. C., for petitioners.

[Syllabus from pages 498-502 intentionally omitted] Messrs. George N. Murdock, of Chicago, Ill., and E. T. McIlvaine, of Miami, Fla., for respondent.

Mr. Justice BUTLER delivered the opinion of the Court.

No. 251.

Respondent, a manufacturer of 'Southern Nut Product,' brought this suit in the Southern district of Florida to restrain petitioner from collecting from respondent, or from dealers selling its product, any tax purporting to be levied under the Oleomargarine Act of August 2, 1886, 24 Stat. 209, as amended by the Act of May 9, 1902, 32 Stat. 194. Petitioner answered denying the essential allegations of the complaint. Respondent applied for a temporary injunction; the court found that it would suffer irreparable injury unless petitioner be restrained pending the final disposition of the case, and granted the application. At the trial, respondent introduced oral and documentary evidence, together with specimens of the product sought to be taxed. The court found that the material allegations of the complaint were established by the evidence, and granted permanent injunction. The record states in condensed form the substance of the testimony, but does not contain the documents which were made exhibits and introduced in evidence. The Circuit Court of Appeals found, and it appears from the testimony brought up, that omitted exhibits constitute a material part of the evidence received, and that the record is consistent with the trial court's conclusion in respect of the facts; it held Rev. St. § 3224 (26 USCA § 154), does not apply and affirmed the decree. 49 F. (2d) 79; Id., 49 F.(2d) 85.

That section declares (26 U. S. Code, § 154 (26 USCA § 154)): 'No suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court.' This suit was commenced December 26, 1929. The complaint, the evidence contained in the record, and documents of which judicial notice may be taken show the following facts:

In April, 1928, respondent commenced and thereafter carried on at Jacksonville, Fla., the manufacture and sale of Southern Nut Product. It contained no animal fat, but was made exclusively of cocoanut oil, peanut oil, salt, water, and harmless coloring matter; it was sold in one pound cartons for cooking, baking, and seasoning. Respondent built up a valuable business in the sale of the product to dealers in Florida and other states.

In January, 1922, the Commissioner of Internal Revenue issued to the Higgins Manufacturing Company a permit to manufacture and sell 'Nut-Z-All' without paying the oleomargine tax thereon. He revoked the permit in December of the same year, and purported to assess such a tax upon some of that product. The company, having paid it under protest to the collector in Rhode Island, brought an action against him in the United States district court for that state to recover the amount so exacted. After hearing evidence, including the testimony of chemists in the Bureau of Internal Revenue called in behalf of the collector, the court in April, 1924, found that the product was not made in imitation or semblance of butter, was not intended to be sold as or for butter, and was not oleomargarine or taxable as such. Higgins Mfg. Co. v. Page, 297 F. 644. Thereupon the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, promulgated the court's decision as Treasury Decision 3590, thus informing all concerned that the product was not subject to the tax.

In August, 1924, the Deputy Commissioner, in answer to an inquiry made by the Institute of Margarine Manufacturers as to the taxability of 'Nut-Z-All,' sent a letter stating: 'The court, having held the product to be not taxable as oleomargarine, the fact that retailers advertise and sell it as butter, or as a substitute for butter, would not render them or the manufacturers liable under the internal revenue law.'

April 1, 1927, the Commissioner, contrary to the court's decree, Treasury Decision 3590, and his deputy's response to the Institute's inquiry, promulgated Treasury Decision 4006 which declared products similar to 'Nut-Z-All' taxable as oleomargarine if colored to look like butter. Then the Higgins Manufacturing company brought suit in the federal court for Rhode Island to restrain the collector from enforcing the tax on its product. The court, upon the allegations of the complaint admitted by motion to dismiss, found that the facts there alleged in respect of taxability were identical with those shown in the earlier case; that the collector was threatening to enforce the tax which had been adjudged illegal; that if the tax should be collected plaintiff's business would be ruined; and July 18, 1927, granted temporary injunction, Higgins Mfg. Co. v. Page (D. C.) 20 F.(2d) 948, which was made permanent in December following.

In July, 1927, the Baltimore Butterine Company brought suit in the Supreme Court of the District of Columbia to enjoin the Commissioner and his deputy from enforcing the tax as declared in Treasury Decision 4006 against its product 'Nu-ine' which was identical in content and appearance with 'Nut-Z-All,' made by the Higgins Manufacturing Company, and Southern Nut Product, made by respondent in this case. The court held the product not taxable, and granted a permanent injunction.

No appeal was taken in any of the cases above mentioned. And the petitioner, by letter, answering an inquiry made by respondent, advised respondent that its product would not be taxable as oleomargarine.

Relying on the decision in Higgins Mfg. Co. v. Page (D. C.) 297 F. 644, Treasury Decision 3590, the Deputy Commissioner's letter to the institute and the injunctions about referred to, respondent believed the product which it proposed to manufacture and sell would not be taxable as oleomargarine, and, upon receipt of petitioner's letter, commenced manufacture and sale of the product.

In 1928, pursuant to instructions sent him by the deputy commissioner stating that respondent's product was held taxable as colored oleomargarine, the petitioner demanded and threatened to collect a tax of ten cents a pound upon respondent's product. But petitioner made no effort to collect the tax on 'Nut-Z-All,' which at the time of the trial was being sold in Florida. Excluding the tax from cost, respondent's net profit was approximately three cents per pound. The enforcement of the Oleomargarine Act against respondent would impose a tax that respondent would be unable to pay, would subject it to heavy penalties and the forfeiture of its plant, together with the materials and manufactured product on hand, and would destroy its business.

The complaint asserts that the exaction of ten cents per pound, while in the guise of a tax, is really a penalty imposed to eliminate competition with butter and is therefore in excess of the power granted to the Congress by the Constitution. But, having regard to McCray v. United States, 195 U. S. 27, 59, 24 S. Ct. 769, 49 L. Ed. 78, 1 Ann. Cas. 561, we treat the imposition laid by the act upon oleomargarine as a valid excise tax. The rule that section 3224 (26 USCA § 154) does not extend to suits brought to restrain collection of penalties (Lipke v. Lederer, 259 U. S. 557, 562, 43 S. Ct. 549, 66 L. Ed. 1061, Regal Drug Corp. v. Wardell, 260 U. S. 386, 43 S. Ct. 152, 67 L. Ed. 318) does not apply.

Petitioner does not here assign as error the finding below that respondent's product was not oleomargarine. He seeks reversal upon the grounds that the statute forbids injunction against the collection of the tax even if erroneously assessed; that this assessment was made by the Commissioner under color of his office, was not arbitrary or capricious and that, if there is any exception to the application of section 3224, this case is not within it.

We are of opinion that, as held below and here claimed by respondent, the product in question was not taxable as oleomargarine defined by section 2 of the Act of 1886 (26 USCA § 541). It is as follows: '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, olemargarine 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 (2) calculated or intended to be sold as butter or for butter.'

That definition remained in force until July 10, 1931. It was amended by the Act of July 10, 1930, 46 Stat. 1022 (26 USCA § 541), effective twelve months later, the material parts of which are printed in the margin.1 The hyphen in the phrase 'vegetable-oil' was eliminated and a comma was inserted between those words and 'annotto.' Words added are shown in italics and words deleted are within brackets.

When the act of 1886 was passed various imitations of and substitutes for butter, the principal ingredients of which were the fats of cattle and swine, were being manufactured and sold in large quantities. Products such as respondent's which contain no animal fat were unknown and were not made in substantial quantities until much later. There is nothing in the act, or that has been brought to our attention, to suggest that Congress anticipated the development...

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