Westinghouse Electric Corporation v. United States

• Decision Date: 01 May 1956
• Docket Number: No. 443-55.,443-55.
• Citation: 140 F. Supp. 565,135 Ct. Cl. 119
• Parties: WESTINGHOUSE ELECTRIC CORPORATION v. The UNITED STATES.
• Court: U.S. Claims Court

140 F. Supp. 565

135 Ct. Cl. 119

WESTINGHOUSE ELECTRIC CORPORATION v. The UNITED STATES.

No. 443-55.

United States Court of Claims.

May 1, 1956.

George G. Tyler, New York City, for plaintiff. L. E. Kust and Albert Rosenblum, New York City, were on the briefs.

Elizabeth B. Davis, Washington, D. C., with whom was Charles K. Rice, Acting Asst. Atty. Gen., for defendant. Andrew D. Sharpe, Washington, D. C., was on the brief.

Before JONES, Chief Judge, and LITTLETON, WHITAKER, MADDEN and LARAMORE, Judges.

LITTLETON, Judge.

The plaintiff sues to recover $1,922,614.96 of manufacturers' excise taxes paid under sections 3403 through 3406 of the Internal Revenue Code of 1939, as amended, 26 U.S.C. The plaintiff asserted two claims in its petition, the second claim being in the alternative. The defendant moved to dismiss the first claim on the ground that it was premature.

The facts alleged in the first claim of the petition may be summarized for purposes of this motion as follows:

The plaintiff corporation manufactures, produces and sells various electrical products, including refrigerators, quick-freeze units, water heaters, dehumidifiers, radio and television sets, ranges, housewares, fans, room heaters, electric light bulbs and tubes, and automotive lamps. Some of these products are sold by plaintiff under warranties of 1 year or less and some are sold under extended warranties, i. e., warranties for periods of 4 years, 9 years or 19 years. Depending upon the particular electrical product and the length of the warranty period, it is plaintiff's policy to replace free of charge defective parts or components or, at plaintiff's option, to pay to the distributor who provides service to the customer an allowance for the labor cost of repair or replacement of certain defective parts or components.

The plaintiff duly filed returns of manufacturers' excise taxes imposed on its sales of these products for the period from October 1, 1941, through March 31, 1954, and paid in full the amounts shown on the returns. The manufacturers' excise taxes paid by plaintiff on its sales of these electrical products were computed without deducting any element of the actual or estimated cost to plaintiff of fulfilling the warranties.

The plaintiff filed a claim for refund on November 23, 1955, in the amount of $1,922,614.96, claiming that the amounts expended during the period November 1, 1949, to March 31, 1954, in fulfilling the warranties were "bona fide discount, rebate or allowance" within the meaning of section 3443(a) (2) of the 1939 Code, as construed by this court in General Motors Corporation, Frigidaire Division v. United States, 121 F.Supp. 932, 128 Ct.Cl. 465, certiorari denied 348 U.S. 942, 75 S.Ct. 363, 99 L.Ed. 737. The plaintiff's petition herein was filed on November 28, 1955.

The defendant contends that plaintiff cannot maintain a suit for the refund of Federal manufacturers' excise taxes under section 3443(a) (2) without filing a claim for refund, and then only after the rejection of the claim by the Commissioner of Internal Revenue, or the expiration of 6 months, whichever is the earlier.

The pertinent part of section 3772(a) of the 1939 Code, as amended, 26 U.S.C. § 3772, 1952 ed., provides:

"Suits for refund — (a) Limitations — (1) Claim. — No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected until a claim for refund or credit has been duly filed with the Commissioner * * *.

"(2) Time. — No such suit or proceeding shall be begun before the expiration of six months from the date of filing such claim unless the Commissioner renders a decision thereon within that time, * * *."

The plaintiff contends that its first claim is not based on a refund of taxes "erroneously or illegally assessed or collected," etc., but rather upon section 3443(a) (2), as construed in the General Motors case, supra, where the tax was properly collected and became refundable only upon the subsequent warranty expenditures. The plaintiff contends that since the tax was properly collected and became refundable only upon the occurrence of subsequent events, section 3772 (a) has no application to this case and, therefore, there is no prohibition against bringing a suit before the expiration of 6 months from the filing of a claim for refund.

The pertinent part of section 3443 provides:

"(a) A credit against tax under this chapter, or a refund, may be allowed or made — * * *

"(2) to any person who has paid tax under this chapter with respect to an article, when the price on which the tax was based is readjusted by reason of return or repossession of the article or a covering or container, or by a bona fide discount, rebate, or allowance; in the amount of that part of the tax proportionate to the part of the price which is refunded or credited. * *

"(b) Credit or refund under subsection (a) shall be allowed or made only upon compliance with regulations prescribed by the Commissioner with the approval of the Secretary."

The pertinent part of the regulations are set forth below.¹

The defendant also contends that plaintiff's claim for refund is timely only with respect to the taxes paid on or after November 23, 1951, because the 4-year statute of limitations contained in section 3313 is the governing statute of limitations. Section 3313 provides:

"Period of limitation upon refunds and credits. — All claims for the refunding or crediting of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty alleged to have been collected without authority, of any sum alleged to have been excessive or in any manner wrongfully collected must, except as otherwise provided by law * * * be presented to the Commissioner within four years next after the payment of such tax, penalty, or sum. The amount of the refund * * * shall not exceed the portion of the tax, penalty, or sum paid during the four years immediately preceding the filing of the claim, or if no claim was filed, then during the four years immediately preceding the allowance of the refund."

The plaintiff contends that section 3313 has no application because that section applies to taxes erroneously collected, etc., whereas plaintiff's taxes were correctly collected, but, upon the warranty expenditures, became refundable under section 3443(a) (2). The plaintiff contends that since the Internal Revenue Code does not provide a statute of limitations for these claims, the governing statute of limitations is the general 6-year statute of limitations contained in 28 U.S.C. § 2501. Section 2501 provides:

"Every claim of which the Court of Claims has jurisdiction shall be barred unless the petition thereon is filed within six years after such claim first accrues."

It is thus seen that the issue presented is whether a refund of manufacturers' excise taxes, which when originally paid were correctly assessed and collected but became refundable under section 3443(a) (2) because of an adjustment in the selling price, is governed by sections 3772 and 3313, which by their terms apply only to taxes erroneously, illegally or wrongfully assessed and collected, etc.

We agree with plaintiff that sections 3772 and 3313 have no application to plaintiff's claim for refund because its claim is for a refund of taxes correctly assessed and collected originally but which subsequently became refundable under section 3443(a) (2), and that since the Internal Revenue Code does not provide a statute of limitations for its claim, 28 U.S.C. § 2501 is the governing statute of limitations. Philip Morris & Co., Ltd., Inc., to Use of Great American Ins. Co. v. United States, 100 F.Supp. 820, 120 Ct.Cl. 703. In the Philip Morris case the taxpayer sued to recover the value of internal revenue tobacco tax stamps affixed to cigarette...