State v. Calumet & Hecla, Inc., Alamet Division
| Decision Date | 11 January 1968 |
| Docket Number | 2 Div. 495 |
| Citation | 281 Ala. 549,206 So.2d 354 |
| Parties | STATE of Alabama v. CALUMET & HECLA, INC., ALAMET DIVISION. |
| Court | Alabama Supreme Court |
MacDonald Gallion, Atty. Gen., Willard W. Livingston and Wm. H. Burton, Asst. Attys. Gen., for appellant.
Reeves & Stewart, Selma, for appellee.
This is an appeal by the state from a decree holding that paper bags used in the course of manufacturing magnesium were subject of a use tax of 1 1/2% Rather than 3% As assessed by the Revenue Department, the lower court taking the view that the bags as used were 'machines' in the processing and manufacture of the magnesium.
Calumet and Hecla, the appellee here, is engaged in the production of primary magnesium metal in the form of ingots and pigs. The magnesium is manufactured by what is termed the thermal reduction process, a highly specialized field of metallurgy, and appellee's plant in Dallas County is the only one in this country using this process.
The raw material used in the process is dolomite, mined by the company at Briarfield, Alabama.
The dolomite is first placed in a rotary kiln and 'calcined' and this calcine thus produced is then ground into powder, and mixed with ferrosilicon and fluorspar. This powdered mixture is made into briquettes under pressure.
These briquettes are quite friable, or breakable, and if exposed to air for any substantial length of time, are subject to rehydration.
From the briquette, press, and while yet warm, the briquettes go to the bagging station where they are placed in seventy pound Kraft paper bags, approximately 50 pounds of briquettes in each bag.
The briquette filled bags are then transported on what is called briquette buggies to the furnace retorts.
These retorts, of which there are 248, are in the shape of a tube some 12 feet long and 11 1/2 inches in diameter. They are heated to temperatures of 2100 Fahrenheit.
Seven bags of briquettes are manually shoved in a retort, one at a time, by means of a specially designed rake. After the bags of briquettes are pushed into the retort, the tube is closed, and the briquettes are heated for 7 1/2 hours.
During this time, the briquetted material releases magnesium vapors which are condensed in the cold section of the retort and in this manner a slug of magnesium called a crown is produced. These crowns are removed from the retorts, and go through two processes of melting and refining before being cast into ingots or pigs or other desired shapes.
The briquetted material is removed from the retort and discarded as waste.
In the hearing below two employee witnesses testified for the company, one being an expert metallurgist. The state also presented a witness who was an expert in the field of metallurgy. Numerous exhibits illustrating the manufacturing process, and a paper bag used therein, were received in evidence.
Actually there appears little contradiction between the testimony of the witnesses, though the expert witness for the state was of the opinion that the paper bags' main characteristic in the manufacturing process was that of a container of the briquettes as they were placed in the retainer, though 'not the only function.' He further testified that the bags helped shape the charge of briquettes in the retorts, and to a degree performed other functions as testified to by the company's expert witness.
After the hearing, the court made the following finding of facts:
'That the paper bags as used by Appellant in its manufacturing process help shape the geometry of the briquette pile inside the furnace retort; that the paper bags as used by Appellant in its manufacturing process prevent rehydration of the briquetted material; that the paper bags tend to prevent over-charging of the furnace retort by maintaining the briquettes in the desired shape; and
'That the paper bags as used by Appellant perform an important function in the thermal reduction process by leaving an unobstructed pathway for the magnesium vapours to move to the cold end of the furnace retort; and
'That the paper bags burn, and are consumed in the process after being shoved into the retorts, but the paper bags help to protect the silicon reducing agent from oxidation while the retorts are open due to the creation of a reducting atmosphere;
'That research has failed to develop any substitute which will perform the function of the paper bags in the thermal reduction manufacturing process as economically, as effectively or as efficiently as do the paper bags; and
'The Court is of the opinion from all of the evidence in the case and does so find as follows:
'That the paper bags as used by Appellant perform an integral function in the manufacture and processing of the magnesium, pig or ingots; and that the paper bags as used by Appellant have a direct part in the manufacture and processing of its tangible personal property; and
'That the paper bags as used by Appellant in the manufacture and processing of the magnesium, pig or ingots, are machines used for the compounding, processing or manufacturing of tangible personal property; and
'That as such machines the said paper bags purchased by Appellant were taxable at the rate of 1 1/2% Pursuant to the provisions of Title 51, Sec. 788(b) of the Code of Alabama of 1940, as amended, rather than at the rate of 3% And * * *.'
The court then decreed that the assessment of 3% Was erroneous and void to the extent that it assessed the use tax above 1 1/2%, and that the appellee was entitled to a refund of $1417.43 with interest from 3 August 1964, the date on which appellee paid the assessment, and noted its appeal therefrom.
In addition to the facts above found by the court, we wish to note that Mr. Peter Gibbs, Technical Manager of appellee's plant, testified that the paper bags used in the operation One of the bags was received in evidence as an exhibit. It bears the legend: '100% Kraft--15 by 29 3/4--5--70 pounds--Special Sack.' Mr. Gibbs further testified that the bags were stamped 'Special Sack' because they were ordered according to specifications by appellee for its use.
It was further shown that the appellee uses 2,000,000 of these bags annually at a...
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