(dissenting).
The statute involved is section 900 of the Revenue Act of 1926, ch. 27, 44 Stat. 9, 104, 26 U.S.C.A. 245, whereby section 600 (a) of the Revenue Act of 1918 was amended so as to provide that on all distilled spirits diverted to beverage purposes, there should be levied a tax of $6.40 per gallon to be paid by the person responsible for the diversion. In computing the tax, credit was to he allowed for the basic tax, if previously paid, which varied from $2.20 to $1.10 per gallon, according to the date of withdrawal. The question is whether the excess charge over and above the basic tax was a true tax or a penalty. It is not disputed that the whole charge was designated by Congress as a tax, hut it is asserted that the circumstances under which the statute was enacted, and the inherent nature of the charge, were such that it was of necessity a penalty.
*104The question was left open in United States v. One Ford Coupe, 272 U.S. 321, 47 S.Ct. 154, 71 L.Ed. 279, 47 A.L.R. 1025. The court had under consideration the forfeiture of an automobile that had been seized in 1923 while being used for the purpose of concealing illicit distilled spirits. Even after the effective date' of the Eighteenth Amendment, January 29, 1920, and the effective date of the National Prohibition Act, January 16, 1920, it was still legal to manufacture distilled spirits for other than beverage purposes; and the court held that the basic tax of $2.20 per gallon imposed by section 600 of the Revenue Act of 1918, as amended by the Revenue Act of 1921, was a true tax, payable whether the liquor was licitly or illicitly made. But the court found it unnecessary to determine whether or not the additional amount, by which the charge was increased to $6.40 per gallon upon distilled spirits withdrawn for beverage purposes, was a penalty. Referring to the provisions of the Revenue Acts and the Prohibition Act, the court said (page 328, 47 S.Ct. page 157): “The acts left in effect the basic tax of $2.20 per gallon, which was and is a true tax on the product, whether legally or illegally distilled, and added to it the additional amounts in case of illegal distillation or diversion to illegal uses. These additional amounts also are called taxes by Congress, and were understood by it to be such. Whether they were .intrinsically penalties, and should be treated as such, we need not determine. The basic tax of $2.20 a gallon on liquor illegally produced is not imposed because of illegality, but despite of it.”
The important circumstance attendant upon the passage of the Revenue Act of 1926 was the existence of the Eighteenth Amendment whereby the manufacture, sale or transportation of intoxicating liquors for beverage purposes in the United States was prohibited. In pursuance thereof, the National Prohibition Act had been passed. By reason of these enactments, the charge of $6.40 was imposed by the Revenue Act of 1926 upon conduct that could not be lawfully performed, but was criminal in its nature; and a reasonable inference would be that the purpose and effect of the additional exaction upon spirits diverted to beverage purposes was not to raise revenue, but to punish the commission of crime. The exaction was especially useful as a means of penalizing corporate organizations to which the manufacture of alcohol on a large scale was for the most part confined.
It is pointed out that the charge of $6.40 had its counterpart in a like charge imposed by section 600 (a) of the Revenue Act of 1918, ch. 18, 40 Stat. 1057, 1105, whereby a tax of $2.20 per gallon was imposed upon spirits withdrawn from bond for non-beverage purposes, and a tax of $6.40 was imposed upon spirits withdrawn for beverage purposes; and it is said that as the $6.40 tax on beverage alcohol in its origin was a true tax in no way linked with national prohibition, being passed before the War Prohibition and the National Prohibition Acts were enacted, the continuance of .the charge in the Revenue Act of 1926 must be considered as the imposition of a tax rather than a penalty.
This argument, however, is not convincing, for in the meantime that which had been a lawful business, normally subject to federal excise tax, had become a crime. In United States v. Constantine, 296 U.S. 287, 56 S.Ct. 223, 80 L.Ed. 233, the court considered a so-called special excise tax of $1,000 imposed by section 701 of the Revenue Act of 1926, 26 U.S.C.A. § 1395, upon the business of a retail dealer in malt liquors carried on contrary to state law. Although such a taxing provision was first embodied in the Revenue Act of 1918, before war time or national prohibition was in effect, and was then carried forward in the Revenue Acts of 1921, 1924 and 1926, the court thought that the legislative history was of little assistance in determining whether the exaction was designed to raise revenue or to prohibit a traffic violative of State law. The conclusion was however reache'd that the provision, as found in the Act of 1926, was a penalty for violation of a State law which Congress had no power to ordain after the repeal of the Eighteenth Amendment. The holding was based upon the disproportionate size of the additional charge for carrying on an unlawful business, as compared with the excise tax upon a lawful business, and upon the further fact that the condition of the imposition was the commission of a crime. The court said (page 295, 56 S.Ct. page 227) : “The condition of the imposition is the commission of a crime. This, together with the amount of the tax, is again significant of penal and prohibitory intent rather than the gathering of revenue. . Where, in addi*105tion to the normal and ordinary tax fixed by law, an additional sum is to be collected by reason of conduct of the taxpayer violative of the law, and this additional sum is grossly disproportionate to the amount of the normal tax, the conclusion must be that the purpose is to impose a penalty as a deterrent and punishment of unlawful conduct.”
Both of these conditions are found in the instant case. While the contrast between the tax on spirits withdrawn for non-beverage purposes and the charge upon spirits withdrawn for beverage purposes is not so glaring as that disclosed in the Constantine case, it is still sufficient to indicate a purpose to impose a deterrent penalty for crime rather than to lay a tax. The fact that Congress has called the exaction a tax does not alter its intrinsic nature. Lipke v. Lederer, 259 U.S. 557, 42 S.Ct. 549, 66 L.Ed. 1061; United States v. LaFranca, 282 U.S. 568, 51 S.Ct. 278, 75 L.Ed. 551.
The same conclusion was reached in the Sixth Circuit in United States v. Glidden Co., 78 F.2d 639, in which the prior decisions of the Supreme Court were discussed, and in the Tenth Circuit in United State v. Jun, 48 F.2d 593. It is said that these cases are not in accord with later decisions of the Supreme Court, but it does ' not appear that the principles hereinbefore enunciated have been repudiated. United States v. Constantine, 296 U.S. 287, 56 S.Ct. 223, 80 L.Ed. 233, has already been considered, and the only other later cases referred to are Sonzinsky v. United States,. 300 U.S. 506, 57 S.Ct. 554, 81 L.Ed. 772, and Helvering v. Mitchell, 303 U.S. 391, 58 S.Ct. 630, 82 L.Ed. 917. In the first of these cases an excise upon dealers in firearms was held not to be a penalty for the purpose of suppressing the traffic, but a true tax within the taxing power of Congress. In the second case, an additional assessment of 50% in case of a deficiency in income tax return, due to fraud with intent to evade the tax, was held to be not primarily a punitive sanction but a remedial sanction imposed for the protection of the revenue and the reimbursement of governmental expense resulting from the fraud. The additional assessment was designed to encourage com-| pliance with a statute that imposed a true tax. It is noteworthy that in both cases, unlike the situation in the pending suit,' the tax considered was imposed upon legitimatc business activity and did not necessarily involve an infraction of the law. Certain general principles enunciated in the previous cases were reaffirmed, that is, the possession by Congress of the power to impose a tax, even though it should be burdensome, or should tend to suppressing the thing taxed, and the power to impose a civil administrative sanction in aid of the collection of a tax, and on the other hand, the incompetency of the courts to inquire into the hidden motives of the legislative body; but there was no criticism of the decisions of the Supreme Court upon which the decisions in the Sixth and Tenth Circuits were based.
The District Judge was justified in following these decisions; and also in deciding, for the reasons given in his opinions, that in view of the pleadings the United States was not entitled to recover even the sum 'of $1.10- per gallon, the amount of the basic tax under the Revenue Act of 1926 on distilled spirits withdrawn during the period covered by the allegations in this case. The pleadings could have been amended so as to present the alternative theory of the right to recover at the rate of $1.10 per gallon, but the United States elected to present this theory in a separate suit now pending in the District Court.