Opinion
No. H-467.
June 16, 1930.
Suit by the Perfection Gear Company against the United States.
Petition dismissed.
This suit is for the recovery of $24,398.48, excise tax alleged to have been erroneously and illegally collected, with interest from the dates of payment. The amount in question was collected by the defendant as an excise tax on devices known as Formica timing gears under section 900 of the Revenue Act of 1921, 42 Stat. 227, 291, and section 600 of the Revenue Act of 1924, 43 Stat. 253, 322 ( 26 USCA §§ 881, 882), as parts for automobiles. The tax was collected on sales made by plaintiff between January, 1921, and February, 1926.
Special Findings of Fact.1. Plaintiff is an Illinois corporation and is successor to D.H. G.H. Daskal and David Davis, a partnership. During the period from January, 1921, to February, 1926, it was engaged in the manufacture and sale, among other products, of silent timing gears used in the functioning of internal-combustion engines. These gears were made of a composition designed to eliminate noise in operation and were used as a part of the timing system of an internal-combustion engine, their function being to time the opening and the closing of valves.
2. Plaintiff made and filed its manufacturers' excise tax returns monthly for the period January, 1921, to February, 1926, inclusive, showing the amount of tax due thereon which was duly assessed on such returns by the Commissioner of Internal Revenue and paid by plaintiff for the months for which the returns were made; the total amount of tax paid being $24,398.48. The silent timing gears, upon the sale of which the tax in question was assessed and paid, were especially designed and primarily adapted for use in automobile engines. Plaintiff manufactured gears and advertised and sold them as replacements for timing gears on almost every known make of engine for automobiles and trucks. During the taxable periods in question silent gears were not a part of the original equipment of any automobile engine and they were sold only for substitute or replacement purposes. Plaintiff did not sell direct to any maker or manufacturer of automobiles or engines for automobiles. Its product was sold mainly to jobbers. The gears manufactured and sold by plaintiff were similar in character but were not all of the same design. The various gears manufactured and sold by plaintiff were given a stock number which indicated the type and make of the internal-combustion engine for which they were to be used. There is no satisfactory proof that any portion of the tax in controversy returned and paid by plaintiff was computed upon sales of timing gears other than the gears especially designed and primarily adapted for use on the various makes of automobile engines.
3. May 22, 1923, plaintiff filed a claim for refund of manufacturers' excise tax paid on timing gears for the period January, 1921, to March, 1923, inclusive, in the amount of $12,321.06. This claim was rejected by the Commissioner of Internal Revenue September 19, 1923.
Later, plaintiff requested the commissioner to reopen and reconsider this claim for refund, and on May 13, 1927, the commissioner sustained the action he had previously taken on the claim.
October 10, 1926, plaintiff filed a claim for refund of the excise tax paid on timing gears for the period April, 1923, to February, 1926, inclusive, in the amount of $12,077.42. This claim was rejected by the commissioner May 23, 1927.
4. This suit was instituted by the filing of the petition on November 14, 1927.
Alex Koplin, of Washington, D.C., for plaintiff.
Ralph C. Williamson, of Washington, D.C., and Herman J. Galloway, Asst. Atty. Gen. (Arthur J. Iles, of Indianapolis, Ind., on the brief), for the United States.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, and WILLIAMS, Judges.
Plaintiff contends that the Formica timing gears manufactured and sold by it, upon the sale of which the tax in question was collected, were not parts for automobiles. These gears were especially designed and primarily adapted, and were widely advertised and sold, for use on almost every known make of engine for automobiles and trucks. They were therefore properly classed as automobile parts, and the sale therefore was subject to tax. Universal Battery Co. v. United States, 50 S. Ct. 422, 423, 74 L. Ed. ___, decided by the Supreme Court May 26, 1930.
It is contended by plaintiff that inasmuch as the silent timing gears were also adapted for use on internal-combustion engines used for purposes other than on automobiles, and were also advertised and sold for general use on such engines, it was not liable for the tax on any of the sales. But when it appears, as here, that the article is primarily designed and adapted for use on automobiles, and that it is widely advertised, sold, and primarily used as parts for automobiles, the sales are taxable, and the burden is upon the taxpayer if he contends in a suit to recover the tax that all of the articles sold were not so used, to establish the amount of such sales. When the primary and chief use of an article is established that subjects it to the tax, the manufacturer cannot escape the tax upon his entire sales by showing that the article could and may have been used for some other purpose, without showing the number of those sold and taxed that were so used. Nor is it of any help to him to say at this time he does not know and has no way of ascertaining the amount of sales of articles for use other than as automobile parts. In Universal Battery Co. v. United States, supra, the court said:
"The administrative regulations issued under section 900 uniformly have construed the term `part' in that section as meaning any article designed or manufactured for the special purpose of being used as, or to replace, a component part of such vehicle, and which by reason of some characteristic is not such a commercial article as ordinarily would be sold for general use, but is primarily adapted for use as a component part of such vehicle. * * *
"Certainly it would be unreasonable to hold that articles equally adapted to a variety of uses and commonly put to such uses, one of which is use in motor vehicles, must be classified as parts or accessories for such vehicles. And it would be also unreasonable to hold that articles can be so classified only where they are adapted solely for use in motor vehicles and are exclusively so used."
The facts in this case bring it within the rule announced by the Supreme Court, and the plaintiff is not entitled to recover.
In view of this conclusion, it is not necessary to pass upon the contention of the defendant that recovery of $6,423.32 included in plaintiff's claim for refund for $12,321.06, which was rejected by the Commissioner September 9, 1923, and representing the tax paid in June, July, August, October, and November, 1922, is barred by the statute of limitation.
The petition must be dismissed, and it is so ordered.
BOOTH, Chief Justice, and WILLIAMS and GREEN, Judges, concur.
This case was tried before the appointment of WHALEY, Judge. He therefore took no part in its decision.