Sterling Cider Co. v. Hassett, 3794.

• Decision Date: 27 January 1943
• Docket Number: No. 3794.,3794.
• Citation: 133 F.2d 590
• Parties: STERLING CIDER CO., Inc., v. HASSETT, Collector of Internal Revenue.
• Court: U.S. Court of Appeals — First Circuit

133 F.2d 590 (1943)

STERLING CIDER CO., Inc., v. HASSETT, Collector of Internal Revenue.

No. 3794.

Circuit Court of Appeals, First Circuit.

January 27, 1943.

Clifford H. Byrnes, Hale, Sanderson, Byrnes & Morton, and Edward R. Hale, all of Boston, Mass., for appellant.

Benjamin H. Pester, Julian D. Simpson, Atty., Dept. of Justice, Joseph Lawrence, Director, Bond and Spirits Division, Dept. of Justice, and Harry B. DeAtley, Asst. to Director, all of Washington, D. C., and Edmund J. Brandon, U. S. Atty., and George F. Garrity, Asst. U. S. Atty., both of Boston, Mass., for appellee.

Before MAGRUDER, MAHONEY, and WOODBURY, Circuit Judges.

MAHONEY, Circuit Judge.

This action was brought pursuant to Section 24 of the Judicial Code, 36 Stat. 1091, 28 U.S.C.A. § 41, Subds. (1 and 5), seeking a refund of $429.60, wine tax, paid November 14, 1940, with interest from that date. The tax was imposed under the provisions of Section 3030(a) (2),¹ 26 U.S. C.A. Int.Rev.Code, 53 Stat. 347, and computed at the rate of 2½ cents on each one-half pint or fraction thereof of sparkling wine allegedly produced by appellant and subject to the tax. The case was tried before a jury. A verdict was returned in favor of the government and judgment entered thereon. We think that the judgment of the court below is correct.

The appellant is engaged in the manufacture of cider. The tax in question was imposed upon the product manufactured by it called "sweet sparkling cider". The process used in producing this product is as follows: Apples are pressed and the apple juice is then placed in a glass container which is sealed at the top and bottom in order to retain the carbon dioxide. Fermentation is controlled and when the apple juice reaches the desired alcoholic content it is run through a special germ proof filter which takes out all of the yeast plant so that the product may be kept indefinitely and is not subject to further fermentation. The result obtained is that the product manufactured has a definite alcoholic content, in this case about 3%, and a sparkling appearance resulting from natural carbonation.

We are asked to determine whether appellant's cider is an apple wine within the provisions of Section 610, 40 Stat. 1109² (1918), amending 39 Stat. 783, Sec. 401 (1916) as amended by 49 Stat. 1957, Sec. 330 (1936). This section provides that natural wine "within the meaning of this Act shall be deemed to be the product made from the normal alcoholic fermentation of the juice of sound, ripe grapes". In 1936, Congress passed an amendment to this section which provides that: "The provisions of the internal-revenue laws applicable to natural wine shall apply in the same manner and to the same extent to * * * apple wines, which are the products * * * of normal alcoholic fermentation of the juice of sound ripe * * * apples". In order to determine whether appellant's product is an apple wine we must first decide whether it falls within the definition of a natural wine, which Congress defined in Section 610. Appellant contends that the phrase "normal alcoholic fermentation" is synonymous with "complete fermentation" or within 1% of complete fermentation. We are not convinced that this interpretation urged by appellant should be adopted. In Funk & Wagnalls, New Standard Dictionary, synonyms for the term "normal" are common, natural or ordinary. We think this is the sense in which the word is used in the statute. As an adjective it is descriptive of the process of fermentation and does not refer to the alcoholic content of the resultant product. Reading the statute in such a manner, it follows that natural wine is the product from the ordinary alcoholic fermentation of the juice of sound, ripe grapes. Insofar as a determination of the alcoholic content of the resultant product is concerned, it seems that the term normal might have been completely omitted from the definition of a natural wine. If Congress, in defining natural wine, intended that the resultant product should have a definite alcoholic content, it could easily have so stated. In the same paragraph it uses the term "complete fermentation" showing clearly that when it sought to address itself to completely fermented grape juice, it knew how to do so. If Congress intended to give the same effect to both of these phrases, we may assume that it would not have varied the language. To do this without intending to vary the meaning would simply be confusing and we see no justification in attributing such inaccuracy to Congress.

The crux of appellant's argument is that cider has always been treated sui generis and that apple cider is something different from apple wine, the term used in the taxing statute. From this the appellant concludes that since its product is a cider, it is, therefore, not subject to the tax levied upon apple wines. It is true, as appellant urges, that earlier legislation, specifically the tariff acts,³ classified cider separately from wine. Appellant cites Sterling Cider Co. v. Casey, D.C. 1923, 285 F. 885, 886 and Tower & Sons v. United States, 1921, 11 Cust.App. 157 in support of its position. In Sterling Cider Co. v. Casey, supra, the court construed a taxing statute so as not to include cider in a single category with beverages, and in Tower & Sons v. United States, supra, the court construed fruit juice and fruit wines as being different from cider. We think both of these cases are correct but this does not prove that Congress, when it used the language "products * * * of normal alcoholic fermentation of * * * apples" did not intend to include appellant's cider within the statute. Certainly there can be no dispute as to the Congressional power to tax apple cider with any alcoholic content as a wine.

Appellant's expert, B. L. Crawford, stated that apple juice completely fermented contains about 7% alcohol and that completely fermented apple juice is still classified in the trade as a cider. Pursuing this same line of argument, the appellant makes the following statement in its brief:

"In view of this consistency of Congress in separately classifying cider as `sui generis' it is reasonably to be inferred that in the case at bar Congress did not include cider in absence of an eo nomine designation.

"`Apple wine' is a term applied to an entirely different type of product from cider. Apple wine has been produced for many years. It was a product made from the fermentation of cider to which 30 to 50 pounds of sugar per 50-gallon barrel had been added so as to attain an alcoholic content of about 13 per cent and which was frequently thereafter fortified with brandy."

We think this argument proves too much. As appellant's expert pointed out, completely fermented apple juice is still a cider and yet the appellant does not dispute the fact that under this statute completely fermented apple juice is treated as a wine. In fact, the basis of its position is that the language "normal alcoholic fermentation" means "complete fermentation" and that since its product is only partially fermented it is, therefore, not a wine. Thus, it is clear that what is actually a cider is taxed under this statute as an apple wine, and that the term "apple wine" is not being used in its customary sense. With the distinction between apple cider and apple wine destroyed, the history of the sui generis classification of apple cider is of little help to us in determining whether appellant's product, which is admittedly an apple cider, may be taxed as an apple wine under this statute.

Appellant contends that its product "Sweet Sparkling Cider" is not within Section 610 because a natural wine is a dry wine, and the essential characteristic of a dry wine is that it shall contain less than 1% of sugar. Since the sugar content of appellant's product is 8.66 per centum, it follows that its product was improperly taxed. The regulations, Article III (1937), do not define a natural wine as a dry wine nor do they specifically state that a dry wine is a wine without any sugar content. They merely say: "(b) `natural wine' shall mean wine produced in accordance with the first paragraph of Section 610 of the Revenue Act of 1918, as amended", and "(f) dry wine shall mean unfortified wine". We assume that implicit in appellant's argument is the thought that in order to produce a dry wine it is necessary that complete fermentation shall take place and that since according to its interpretation of the statute the phrase "dry wine" is synonymous with the phrase "natural wine", therefore, Congress in using the term normal alcoholic fermentation meant complete fermentation. We cannot accept this argument. From a reading of Section 610 it is clear that Congress sought to distinguish between natural wine and wines to which sugar and water are added in order to correct their natural deficiencies. The contention that the terms natural wine and dry wine are synonymous finds no support in the statute. While we may assume that appellant's contention is correct that a dry wine is a wine with a negligible sugar content and that a dry wine is a natural wine, it does not follow that a wine resulting from a partial fermentation is not also a natural wine.

In order to prove that there was no Congressional intent to tax apple cider as an apple wine, appellant has referred us to sections of the Congressional Record⁴ covering the debates in Congress which deal completely with the wine question prior to the passage of the 1916 Act. It is the contention of the appellant that the Congressional Record clearly demonstrates that the purposes which led to the passage of the taxing statute were to give to eastern wine manufacturers the right to increase the volume of their product by the addition of sugar and water and to permit them to fortify their wine as inexpensively as could California wine producers who, prior to the passage of the 1916 Act, had a real advantage over eastern wine producers in the matter of fortification....