State v. Calumet & Hecla Consol. Copper Co.

Decision Date30 June 1953
Docket Number8 Div. 583
Citation259 Ala. 225,66 So.2d 726
PartiesSTATE v. CALUMET & HECLA CONSOL. COPPER CO.
CourtAlabama Supreme Court

Si Garrett, Atty. Gen., and H. Grady Tiller, Asst. Atty. Gen., for appellant.

Peach, Caddell & Shanks, Decatur, for appellee.

Burr, McKamy, Moore & Tate, Birmingham, amici curiae.

LIVINGSTON, Chief Justice.

This an appeal from a decree of the Circuit Court of Morgan County, Alabama, in Equity, overruling the demurrer of the State of Alabama to the bill of complaint, as amended, of the Calumet and Hecla Consolidated Copper Company, a corporation, hereinafter called the Company, and also overruling the demurrer to certain designated aspects or phases of said bill of complaint.

The bill of complaint, as amended, reflects substantially the following:

That on or about the 20th day of July, 1949, the State Department of Revenue made a deficiency assessment against the Company for use tax alleged to be due by said Company under the provisions of the Alabama Use Tax Act, Tit. 51, Section 787 et seq., Code of Alabama 1940, for the period from January 1, 1948, through March 31, 1949, in the total amount of $3,631.67, including interest, and gave due notice thereof.

The Company filed objections to said assessment and petitioned for a redetermination of said use tax in all respects as by law required. After an oral hearing, and on or about December 23, 1949, the Department of Revenue made a final assessment for use taxes against the Company for said period in the sum of $4,069.02, consisting of use tax in the amount of $3,723.43, and interest on said tax in the sum of $345.59, and of which assessment, notice was duly given to the Company as required by law. On or about January 4, 1950, the Company duly appealed from said final assessment in all respects as required by law, to the Circuit Court of Morgan County, Alabama, in Equity. No question is raised by the state with respect to the regularity of the appeal, but instead it is admitted that the appeal was proper and duly perfected.

As stated above, the appeal is from a decree overruling the state's demurrer to the bill of complaint filed by the Company in the Circuit Court of Morgan County, Alabama, in Equity. The bill of complaint, as amended, for the purpose of clarification and treatment, divides the several articles involved in this suit into what it terms Items Nos. 2, 3, 6, 7, 10, 11, 15, 18, 19, 22, 24 and 25, and claims that neither of said items is subject to the Alabama Use Tax. The state's demurrer was sustained to items designated in the bill of complaint and in the decree of the court as Items Nos. 3, 7, 10, 11 and 22, and the state's demurrer was overruled as to all other designated items.

The only question involved in the case is whether or not the allegations of the bill with respect to each of said items was such as to bring said items within the exemptions of the use tax law, so that the demurrer of the state was properly overruled, or whether or not the property evidenced by said items or classifications were, as reflected by the bill, or the allegations thereof, subject to the state's demurrer, and, of a consequence, to the use tax in question.

We will treat the items involved as was done in the bill of complaint and the decree of the lower court, and separately decide the question involved as to each separate and several item.

We will not repeat the well-known rules of construction attending consideration of taxing statutes and exemptions thereto which have been often repeated in our decisions. See Pullman-Standard Car Mfg. Co. v. State, 253 Ala. 638, 46 So.2d 500, and cases therein cited; State v. Wertheimer Bag Co., 253 Ala. 124, 43 So.2d 824; State v. Bridges, 246 Ala. 486, 21 So.2d 316, 159 A.L.R. 678; State v. Levery, 248 Ala. 656, 29 So.2d 129; Lone Star Cement Corp. v. State Tax Commission, 234 Ala. 465, 175 So. 399; State v. Coastal Petroleum Corp., 240 Ala. 254, 198 So. 610.

The articles involved, characterized in the bill of complaint and also in the decree of the trial court as Item No. 2, consists of machine shop machines and equipment consisting of screw machines, milling machines, grinders, lathes, and other machines, and the parts of such machines, attachments, and replacements therefor which are made or manufactured for use on or in the operation of such machines, and which are necessary to the operation, and are customarily so used. These machines are used by the taxpayer in converting raw materials into manufactured products, which products are not sold by the taxpayer but are used by the taxpayer as machinery, tools, appliances, etc., with which it manufactures the products which it does sell. The basis for the trial court's holding such machines, equipment, etc., or the use thereof, nontaxable is Section 789(p), Title 51, Code of Alabama 1940, Pocket Part. Said section reads, in pertinent part, as follows:

'The storage, use or other consumption in this state of the following tangible personal property is hereby specifically exempted from the tax imposed by this article: * * *. Machines used in mining, quarrying, compounding, processing, and manufacturing of tangible personal property; provided that the term 'machines,' as herein used, shall include machinery which is used for mining, quarrying, compounding, processing, or manufacturing tangible personal property, and the parts of such machines, attachments and replacements therefor, which are made or manufactured for use on or in the operation of such machines and which are necessary to the operation of such machines and are customarily so used.'

It is a well established principle that exemptions from taxation are strictly construed against the taxpayer and in favor of the state. Title Guarantee Loan & Trust Co. v. Hamilton, 238 Ala. 602, 193 So. 107; State v. Praetorians, 226 Ala. 259, 146 So. 411.

The state contends that the words 'for sale' should be read into this exemption statute by inference. In other words, appellant asks that following the words 'manufacturing of tangible personal property,' wherever the same appears in the above-quoted excerpt from Section 789, there be added the words 'for sale,' or 'for sale as so manufactured.' It cites no direct authority to support this proposition, but bases its argument on inferences and certain rules of statutory construction. It points out that in Sec. 787, Title 51, Code of 1940, the words 'for sale' appear in the following portion of the definition of wholesale sale:

'The term 'wholesale sale' shall include a sale of tangible personal property or products (including iron ore) to a manufacturer or compounder which enters into and becomes an ingredient or component part of the tangible personal property or products which he manufactures of compounds for sale, and the furnished container and label thereof.'

It is argued, therefore, that only those items of personal property which manufacture other personal property for sale are exempt under Sec. 789(p). It is further argued that the appellee is a manufacturer and is claiming exemptions for material embraced in Item No. 2 because it is a manufacturer, although the machines and the materials there involved were used by it, not in manufacturing tangible personal property for sale, but for its own use, and that, therefore, the definitions contained in the decisions of this court of a manufacturer are important in determining the question before the court, in that this court has repeatedly held that a manufacturer 'sells to take a profit already earned, and a merchant, or dealer, sells to earn a profit.' It is argued that when the legislative intent is not clear from the act itself it should be construed in pari materia with other acts concerning the same subject. We are familiar with these rules of construction, but the fact remains that the appellant is asking the courts to supply words not found in the statute itself and which could have been inserted in the act by the legislature if it had intended so to do. Moreover, the effect of the state's argument would be to penalize the appellee because it objects to buying, use tax free, machines, machinery, and parts therefor, which it uses in manufacturing tangible personal property for sale, and prefers to practice economy and conservation in money, time and effort, and manufacture its own machines and parts for machines, with which, in turn, it manufactures tangible personal property for sale.

The plain terms of the statute exempts machines, and parts of such machines, attachments and replacements therefor, used in manufacturing tangible personal property. The rule with reference to a court supplying words said to be omitted from a statute is stated in 59 C.J. 992-993, as follows:

'Words Omitted. Where it appears from the context that certain words have been inadvertently omitted from a statute, the court may supply such words as are necessary to complete the sense, and to express the legislative intent, but it cannot supply words purposely omitted, and should supply an omission only when the omission is palpable and the omitted word plainly indicated by the context; and words will not be added except when necessary to make the statute conform to the obvious intent of the legislature or prevent the act from being absurd; and where the legislative intent cannot be accurately determined because of the omission, the court cannot add words so as to express what might or might not be intended.'

See, also, 50 Am.Jur., pp. 221, 222, 223; Trader v. Jester, 1 Terry, Del., 66, 1 A.2d 609, 612; Moruzzi v. Federal Life & Casualty Co., 42 N.M. 35, 75 P.2d 320, 115 A.L.R. 407, 415; Johnson v. Barham, 99 Va. 305, 38 S.E. 136, 137, 138; and Railroad Commission of Indiana v. Grand Trunk Western R. Co., 179 Ind. 255, 100 N.E. 852, 855.

It is true that exemption statutes are to be strictly construed in favor of the taxing authority, State v. Wertheimer Bag Co., 253 Ala. 124, 43 So.2d 824, and...

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