Opinion
This case having been heard by the Court of Claims, the court, upon the evidence adduced, makes the following special findings of fact:
1. The plaintiff is a corporation, and during the period involved in this suit was engaged in the manufacture of steel springs. Approximately 2 per cent. of all the springs manufactured by plaintiff during the period involved were designed and manufactured for use in locomotives, logging trucks, trailers, and semitrailers. The other springs manufactured by plaintiff were designed for passenger automobiles and primarily adapted for use thereon.
About 5 per cent. of the springs designed for automobiles were sold for use on trailers. During the period involved, there were no manufacturers of trailers, and relatively few trailers were in use. Such trailers were made by blacksmiths, who purchased the springs and made trailers to fit such springs. A few of the springs were used for some other purposes than those mentioned above, but the evidence does not show even approximately the number which was so used which was probably so small as to be negligible.
Plaintiff's books do not disclose what portion of the sales were to manufacturers of automobiles and automobile trucks. There was no segregation in the accounts kept by the plaintiff as to springs that were adapted for use on automobiles and those not so adapted, nor was there any separate record of the number or sale price of the springs which would be taxable as automobile parts or accessories and of those that would not be taxable.
2. Defendant assessed excise taxes against plaintiff in the sum of $22,377.60 upon springs so manufactured and sold by plaintiff during the period between April 1, 1920, and November 1, 1922. Plaintiff paid to defendant during the years 1920, 1921, and 1922 the excise taxes so assessed.
By a ruling of the Commissioner of Internal Revenue, published September 25, 1933, the Commissioner determined that the springs upon which these taxes had been assessed were not taxable. Thereupon plaintiff filed three separate claims for refund, making a total claim of $22,377.60, covering the excise taxes so paid by plaintiff. Defendant allowed these claims for refund in their entirety, and refunded to plaintiff the sum of $22,377.60.
In April 1924, defendant reassessed against plaintiff excise taxes upon the springs so manufactured and sold by plaintiff between April 1, 1920, and November 1, 1922, in the sum of $14,835.09. The defendant demanded payment of said taxes, and warrants of distraint were issued thereon. Plaintiff thereupon paid to defendant, under protest, the following sums:
On July 10, 1924, $6,138.66 as principal of tax, $32 interest, and $1.35 penalty; on July 10, 1924, $8,695.83 as principal of tax, and $126.41, interest; and on November 22, 1924, $914.38, as principal of tax, and $167.39 interest.
3. On December 9, 1924, plaintiff duly filed a claim for refund for $914.38 principal, and $167.39 interest; on January 23, 1925, plaintiff duly filed a claim for refund $7,908.47, plus interest thereon; and on January 23, 1925, plaintiff duly filed another claim for refund for $6,172.01, plus interest thereon. The above claims covered the sums repaid by plaintiff to defendant upon the reassessments hereinbefore mentioned.
On March 31, 1925, defendant rejected the claim for refund so filed by plaintiff on December 9, 1924, for $914.38, and on June 10, 1925, defendant rejected the claim for refund so filed by plaintiff on January 23, 1925, for $7,908.47, and on June 12, 1925, defendant rejected claim for refund filed by plaintiff on January 23, 1925, for $6,172.01. None of the moneys so paid by plaintiff upon said reassessments has been returned to plaintiff by defendant. The petition herein was filed on October 9, 1929.
4. Plaintiff paid the taxes so collected by defendant, and no part thereof was passed on to the purchasers of such springs. Plaintiff did not increase its prices to purchasers of springs when taxes were levied on automobiles and automobile parts. George A. King, of Washington, D.C. (King & King, of Washington, D.C., on the brief), for plaintiff.
James A. Cosgrove, of Washington, D.C., and Frank J. Wideman, Asst. Atty. Gen., for the United States.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
GREEN, Judge.
This is a suit for the refund of $15,213.35 assessed and paid as excise taxes on the sale of steel springs manufactured by the plaintiff during the period April 1, 1920, to November 1, 1922. The evidence is not at all definite, but we have found that approximately 98 per cent. of the springs manufactured and sold by plaintiff during this period were primarily designed and specially adapted for use on automobiles. Approximately 2 per cent. were specially designed for some other purpose, such as locomotives, logging trucks, and possibly some other uses in very few numbers. About 5 per cent. of the springs designed for us on automobiles were sold for use on trailers, but, instead of being made in accordance with a design for that purpose, the trailers were made to conform to the springs. There were at the time no manufacturers of trailers and few in use. Such trailers as were then being built were constructed by blacksmiths who purchased the springs and made the trailers to fit them. The evidence fails to show in dollars and cents what proportion of plaintiff's sales of springs was of those designed for use on automobiles, and what proportion was of those designed for some other purpose.
Excise taxes on the sales of springs during the period in question were paid by plaintiff in the amount of $32,377.60. Afterwards and on September 25, 1922, the Commissioner ruled that the springs upon which these taxes had been assessed and paid were not taxable as automobile parts or accessories. The amount paid was subsequently refunded to plaintiff, but in April, 1924, the Commissioner of Internal Revenue reversed his prior ruling in part and reassessed the taxes upon the sale of springs in the amount of $14,835.09, which amount, together with interest and penalty thereon, was paid by the plaintiff. Subsequently, plaintiff filed claims for refund, and the amounts and dates of these claims and the dates of the several rejections thereof are shown in the findings.
The first question to be determined in the case is whether sales of the springs which plaintiff manufactured were subject to tax as automobile parts or accessories. It appears from the findings that, while about 2 per cent. of the springs were designed for use on vehicles other than automobiles or automobile trucks, the remainder were designed or manufactured for the purpose of being used upon automobiles, and were primarily adapted for such use. They were therefore subject to the tax. See Universal Battery Co. v. United States, 281 U.S. 580, 50 S.Ct. 422, 74 L.Ed. 1051. It is true that the evidence also shows that about 5 per cent. of the springs manufactured and sold by the plaintiff were used on trailers, but they were not specially adapted for use on trailers. On the contrary, the trailers had to be adapted to the springs. The fact that the springs could be and were sometimes used for other purposes would not prevent the sales thereof being subject to the tax. Id.
As above stated, the evidence shows that about 2 per cent. of the springs manufactured and sole were designed for purposes not connected with automobiles, but there is nothing in the testimony from which the court could find even approximately the amount of the sales of such springs. When the Commissioner recomputed the tax, he greatly reduced the amount originally assessed and collected and evidently omitted from the new assessment a large proportion of the sales on which the tax had been imposed in the first instance. The amount of reduction in the total of the tax was so great that it would seem to make an allowance even larger than was necessary to cover every possible contingency. But, however this may be, the burden was on the plaintiff to show that under the final assessment some sales were included that were not subject to the tax, and evidence is wholly lacking on that point.
The plaintiff also bases its suit on the fact that the Commissioner held the first assessment of the tax against the plaintiff on account of the sales in controversy was invalid and refunded to plaintiff the taxes so paid. It is contended that the action of the Commissioner constituted an account stated preventing the government from again assessing the taxes and collecting the amount thereof. We think the rules with reference to the effect of an account stated have no application to such a situation. If this ruling of the Commissioner and refunds made pursuant thereto can be held to be an account stated, a matter which we do not find necessary to decide, it was based on an error and mistake which are always held to be a sufficient ground for rescinding any statement made as to the condition of the account.
The plaintiff also contends that the Commissioner, having first ruled that the sales were not subject to tax, had no power to change his decision, but this court has held to the contrary in Oak Worsted Mills v. United States, 36 F. (2d) 529, 68 Ct.Cl. 539, 546, affirmed 282 U.S. 409, 51 S.Ct. 186, 75 L.Ed. 415.
Our decision upon these matters makes it unnecessary to consider any other features of plaintiff's claim or other defenses set up by the defendant. Plaintiff's petition must be dismissed and it is so ordered.