Skinner v. United States, 795.

• Decision Date: 28 June 1934
• Docket Number: No. 795.,795.
• Citation: 8 F. Supp. 999
• Parties: SKINNER v. UNITED STATES.
• Court: U.S. District Court — Southern District of Ohio

8 F. Supp. 999

SKINNER v. UNITED STATES.

No. 795.

District Court, S. D. Ohio, W. D.

June 28, 1934.

Sidney G. Kusworm, of Dayton, Ohio, for plaintiff.

Frank J. Wideman, Asst. Atty. Gen., E. F. McMahon, Sp. Asst. to Atty. Gen., and Francis C. Canny, U. S. Atty., and Frederic W. Johnson, Asst. U. S. Atty., both of Cincinnati, Ohio.

NEVIN, District Judge.

On May 27, 1933, plaintiff herein filed his declaration (or petition) wherein he prays judgment against the defendant, United States of America, in the sum of $1,323.85, which sum plaintiff alleges was assessed against him as manufacturer's excise taxes and paid by him to the collector of internal revenue for the First collection district of Ohio, on March 30, 1933, for the taxable period February 1, 1933, to February 28, 1933, inclusive, together with interest from March 30, 1933, and costs.

Plaintiff alleges in his declaration that he is a citizen of the United States and of the Southern district of Ohio, and that the controversy is one arising under the laws of the United States providing for internal revenue; that on March 30, 1933, in accordance with the provisions of the Revenue Act of 1932 (26 USCA § 3001 et seq.), plaintiff filed with the collector of internal revenue of the United States for the Southern district of Ohio, Western division, a return for the month of February, 1933, on retreaded tires which he sold during that month, and that he paid the manufacturer's excise tax thereon imposed under section 602 of the Revenue Act of 1932 (26 USCA §§ 3601-3629 note) "on new tires." He alleges that he made the return on the retreaded tires and paid the excise tax thereon for the reason that the Commissioner of Internal Revenue informed him on February 7, 1933, that, notwithstanding the fact that the retreaded tires sold or to be sold by plaintiff were stamped with the word "Retread" on each and every retreaded tire sold, nevertheless such retreaded tires are subject to tax when sold by virtue of section 602 of the Revenue Act of 1932; that on March 30, 1933, he filed with the collector of internal revenue, aforesaid, his proper executed claim for refund in the sum of $1,323.85 on the proper official form, and that his claim for refund set forth the following grounds as the basis for the refund, to wit: "1. Section 602 of the Revenue Act of 1932 imposing a tax on tires and inner tubes has reference only to complete newly manufactured articles; and that in holding retreaded tires to be subject to tax, the Commissioner of Internal Revenue exceeded the authority given to him under said Revenue Act of 1932. 2. Retreaded tires were known to the automobile industry for many years preceding the passage of the Revenue Act of 1932, were extensively advertised, and were well known commercial commodities, and that if Congress had intended that the tax should apply to such articles, it would have made specific provision therefor in said Revenue Act of 1932. 3. The retreading of the tire does not materially change the product so that it loses its original identity. 4. In the retreading of tires, in order to make same substantial, it is necessary for plaintiff to add rubber to the old tires, thus increasing the weight of the tire from six to ten pounds; that a tax on the basis of two and one-fourth cents a pound on the total weight of such retreaded tires (exclusive of metal rim or rim bases) places a larger tax burden on plaintiff than a manufacturer of new tires must pay; that a retreaded or second-hand tire, in order to be sold, must be sold for less than a new tire; that this tax burden upon plaintiff amounts to a confiscation of plaintiff's business and property, for the reason that plaintiff is forced into the position of competing, on secondhand or retreaded tires, with the product of the manufacturer of new tires, and by the action of the Commissioner of Internal Revenue in taxing retreaded tires on the same basis as new tires, this plaintiff, who has spent a very large sum of money in equipping his manufacturing plant for the retreading of tires and in building up the good will of his business in many parts of the United States, is forced to go out of business."

On July 25, 1933, an answer was filed on behalf of the defendant. Subsequently, on September 18, 1933, an amended answer was filed in the form of a general denial, denying, among other things, that section 602 of the Revenue Act of 1932, imposing a tax on tires, has reference only to complete newly manufactured tires, and denying that in holding retreaded tires to be subject to tax the Commissioner of Internal Revenue exceeded the authority given to him under the Revenue Act of 1932. It is further denied that retreaded tires were known to the automobile industry for many years preceding the passage of the Revenue Act of 1932; that the retreaded or secondhand tire, in order to be sold, must be sold for less than a new tire; that a tax on the basis of 2¼ cents a pound on the total weight of retreaded tires (exclusive of metal rim or rim bases) places a larger tax burden on plaintiff than a manufacturer of new tires must pay. That plaintiff is a citizen of the United States and that the controversy is one arising under the laws of the United States providing for internal revenue is admitted.

Defendant alleges that in the process of retreading the plaintiff materially changed the names and other identification marks of tires as originally manufactured and caused the tires to be put back into service under other, new, and different names.

Subsequently, plaintiff filed his reply, denying that the retreaded tires involved lose their original identity through the process of retreading, or that the manufacturer's name or numbers originally placed on the tires were removed or destroyed.

On November 20, 1933, counsel for the respective parties, in writing, waived the right of trial by jury and agreed to and did submit the cause, both upon the facts and upon the law, to the court. On the same day that the jury was waived, the cause came on for hearing before the court, at which time, before the taking of any testimony, there was submitted and made part of the record a stipulation with respect to certain facts which were agreed upon and which it is agreed should be taken by the court as true, the stipulation providing that other evidence might be introduced not inconsistent with the facts set out in the stipulation. In addition to a statement as to the identity of the parties to the action, the stipulation (Exhibit 1) contains the following:

"4. Plaintiff made and filed its manufacturer's excise tax return for the taxable period February 1, 1933, to February 28, 1933, inclusive, showing the amount of the tax due thereon, which was duly assessed on such return by the Commissioner of Internal Revenue, paid by plaintiff, for the month, in the amount, and on the date hereinafter set forth, as follows:

                Period    Year  Month  Year  Page  Line   Amount      Date paid
                February  1933  March  1933  1038    3   $1,323.85  Mar. 30, 1933
                

"5. On March 30, 1933, plaintiff filed its claim for refund #ST5938 of manufacturer's excise tax so paid on tires for the period February 1, 1933, to February 28, 1933, inclusive, in the amount of $1,323.85, which was duly rejected by the Commissioner of Internal Revenue on May 22, 1933. 6. Copies or originals of the return, claim for refund, report, letters and other departmental records pertinent to the issues in this case, hereto attached, shall be admitted and received in evidence the same as if the originals thereof were properly identified and admitted, subject only to the right of either party to object because of their irrelevancy or immateriality."

In addition to the stipulation and the evidence by way of exhibits attached thereto, the testimony of three witnesses was offered in open court, to wit, Messrs. Hood, Roper, and Skinner, all called on behalf of plaintiff. There were also a number of exhibits introduced through these witnesses, reference to which is made from time to time in the record. No witnesses were called on behalf of the defendant, nor were any exhibits offered on behalf of the defendant.

After the case had been submitted, but while it was still under consideration by the court and before any decision had been rendered herein, plaintiff, on March 27, 1934, filed a motion for leave to amend his declaration "so as to conform to the evidence with regard to the fact that plaintiff has not included the tax in the price of the retreaded tires with respect to which it was imposed, or collected the amount of tax from the vendees." On April 2, 1934, the court sustained this motion, Gen. Code Ohio, § 11363, United States v. Jefferson Electric, etc., Co. (Routzahn, Collector, v. Willard Battery Co.) 291 U. S. 386, 410, 411, 54 S. Ct. 443, 78 L. Ed. 859, and thereupon, on the same day, plaintiff filed an amended declaration, which declaration is exactly in all respects the same as the original declaration except that the amended declaration contains this additional allegation, to wit, "Plaintiff further says that he has not included the tax on said retreaded tires in the price of the retreaded tires with respect to which it was imposed or collected the amount of tax from the vendees."

On the same day, defendant filed a motion to strike this allegation from plaintiff's amended declaration, which motion was overruled, and thereupon, on April 2, 1934, defendant moved for leave to reopen the case "for the reason that it may go more fully into those matters now made a part of this case by virtue of the Court's action in sustaining plaintiff's motion for leave to amend its declaration to conform to the evidence."

On May 11, 1934, the court sustained this motion made on behalf of the defendant and granted defendant leave to reopen its case for the purposes requested, and thereupon there was filed on the same day a stipulation signed by counsel for all the...