Monroe Cider Vinegar & Fruit Co. v. Riordan

MANTON, Circuit Judge

(dissenting). An answer was filed to the complaint in this action which seeks to recover the return of taxes paid under the Revenue Act of 1918 under protest. Thereafter the denial of the. material allegations of the complaint set forth in that answer was withdrawn by stipulation, and a motion made by the internal revenue collector for judgment on the pleadings. It resulted in the dismissal of the complaint on the merits, and judgment was thereafter entered against the plaintiff in error. This writ is sued out seeking to review the judgment so entered.

The plaintiff in error is engaged in the manufacture and sale of sweet cider containing less than one-half of one per cent, of alcohol, and for *635a sale which was made the collector of internal revenue for the Twenty-Eighth district of the state of New York, by virtue of authority claimed to be vested in him, assessed a tax under the Revenue Act of 1918 (40 .Stat 1057, 1116). The tax, amounting to $386.22, was paid by the plaintiff in error under protest. Thereafter it filed a claim for the refund of this tax. This claim was disallowed, and it has resulted in this action. The theory of the plaintiff in error’s right of recovery is based upon the ground that sweet cider is not taxable as a beverage within the provisions of the Revenue Act of 1918; further, that if cider is taxable, the Commissioner of Internal Revenue had no authority, for and could not collect a tax which included the price of the container in which the cider was sold.

The act in question (40 Stat. 1057, 1116) provides for a tax on beverages derived from cereals or substitutes thereof and containing less than one-half of 1 per cent, of alcohol sold by the manufacturer, producer, or importer, in bottles or other closed containers, and a tax on all unfermented grape juice, ginger ale, root beer, sarsaparilla, pop, artificial mineral waters (carbonated or not carbonated), other carbonated waters or beverages, and other soft drinks, sold by the manufacturer, producer, or importer, in bottles or other closed containers. This is a tax equivalent to 10 per cent, of the price for which they are sold. The act provides that the tax is levied, assessed, and collected in lieu of the tax imposed by section 313 of the Revenue Act of 1917 (40 Stat. 300, 312). This act also provided ¿ tax on soft drinks. It is provided by the Revenue Act of 1918 (section 1309, 40 Stat. 1057, 1143 [Comp. St. Ann. Supp. 1919, §§ 6371^, 6371%j]) that the Commissioner of Internal Revenue with the approval of the Secretary, is authorized to make all needful rules and regulations for the enforcement of its provisions, and it is provided by section 1310a (section 6371%k) that, in the case of overpayment or overcollection of any tax proposed by section 628 (section 6161%d), the person making such overpayment or overcollection may take credit therefor against taxes due upon any monthly return, and shall make refund of any excessive amount collected by him upon proper application by the person entitled thereto. Pursuant to this authority, the collector of internal revenue formulated articles 11 and 13 of Regulation 52, which was approved on May 3, 1919, relating to this tax on soft drinks sold in bottles or other closed containers. In substance, it provides that the amount paid for the beverage in the closed container is a basis for computing the tax, though the container is billed separately. If the beverage is sold under an agreement by which the manufacturer is to refund the purchaser a specified amount upon the return of the container, the tax nevertheless attached to the whole price, including the amount agreed to be refunded upon the return of the container. And in such case the manufacturer may take credit in any monthly return for that portion of the tax paid which the amount actually refunded to the purchaser for the return of the container bears to the total sales prices as above computed. Credit is allowed only if at the time of making return and paying tax on the original sale a statement has been attached to the return showing the containers subject to refund, and at the time of the application for *636the credit separate affidavit is made of the refunds actually identifying them with the sales referred to. By article 13 of the Internal Revenue Department, rule that fermented liquors other than cereal beverages are taxable at the rate of 10 per cent., the term “other soft drinks” includes among other things, fruit juices sold as beverages by the manufacturer in bottles or other closed containers. The question presented is whether “sweet cider,” as that term is commonly understood, is a soft drink under the provision of section 628a of the Revenue Act of 1918. In common phrase, cider is referred to (a) as sweet cider and (b) as hard cider. It is defined as “formerly any liquor made of the juice of fruits and now as the expressed juice of apples, either before or after fermentation.” Century Dictionary. Sweet cider is cider before fermentation, and hard cider is that which has lost its sweetness from fermentation. Before the change of sweet cider to hard, the liquid is nothing but apple juice, and the. fermentation is the yeast or leavening of the juice of the apple. It is this which changes the cider from sweet to hard.

The courts are obligated to take notice of the ordinary acceptation of the words in the English language and also such matters of science as are well known to all men of common understanding and intelligence. Brown v. Piper, 91 U. S. 37, 23 L. Ed. 200; Terhune v. Phillips, 99 U. S. 592, 25 L. Ed. 293; King v. Gallum, 109 U. S. 99, 3 Sup. Ct. 85, 27 L. Ed. 870.

The meaning of the word “cider,” its method of production and its general constituents are matters of common knowledge and upon which all books of accepted authority agree. No court would be justified in affecting ignorance of these facts or in closing its eye to' them in a case requiring their application. Eureka Vinegar Co. v. Gazette Printing Co. (C. C.) 35 Fed. 570. As that term is commonly understood, cider is tire expressed juice of apples, either fermented or un-fermented. The terms “sweet cider” and “hard cider” are used to distinguish in the popular understanding between the juices of the fruit before and after fermentation. It is a matter of common knowledge that sweet cider is not intoxicating. There may be a trace of alcohol, but it is not more than one-half of 1 per cent. In State v. Oliver, 26 W. Va. 422, 53 Am. Rep. 79, the court held that cider or crab cider was not a spirituous liquor, and that—

This “common beverage found in every locality, used more or less at certain seasons by all classes of our people, as well as for many culinary purposes, as for a beverage, would naturally be present in the minds of every legislator who was endeavoring to classify and arrange artificial drinks technically correct but not in popular understanding. The term should be construed according to universal use and understanding.”

Unadulterated juice of apples pressed by the addition of one-tenth of 1 per cent, of benzoate of soda, and called preserved sweet cider, is not within the National Prohibition Act of October, 1919 (41 Stat. 305). Hildick Apple Juice Co., Inc., v. Williams (D. C.) 269 Fed. 184. As the term “soft drink” is univerally used and understood, cider is within that class of beverage. “Soft drinks” has been commonly understood to mean nonintoxicating beverages.

*637“While including lemonade, soda water, mineral waters, and other innocent and harmless beverages that are and have been for years sold, all over the country, they are generally used in reference to ‘malt mead,’ ‘near beer,’ and other alcoholic decoctions, invented to take the place of intoxicating drinks.” Bradford v. Jones, 142 Ky. 820, 135 S. W. 290.

By the use of the word “other,” Congress denotes grape juice as a fruit drink and taxes other drinks considered to be of a similar nature or “soft.” To give meaning to the term “soft drinks” in the statute, it is essential to charge Congress with an intent to mean and to include other fruit juices. I do not think that Congress intended to discriminate in favor of sweet cider. No economic reason is advanced why fruit juices such as grape juice should be taxed and the juice of apples should not. Pursuant to his authority,- the Commissioner of Internal Revenue has ruled that by article 13 of Regulation 52 sweet cider is taxable. Md. Casualty Co. v. U. S., 251 U. S. 342, 40 Sup. Ct. 155, 64 L. Ed. 297. I think this regulation was not in conflict with the statutory provision, and that by virtue of the authority thus intrusted to the Commissioner sweet cider in this instance is properly taxable.

Nor was it error to hold below that the tax was rightly imposed upon the sale price of both the contents and the container. By a departmental regulation, a rule has been established which forms a basis for the tax on the sale price of both the beverage and container. A departmental regulation addressed to and reasonably adapted to the enforcement of the act of Congress, the administration of which is confided to such department, has the force and effect of law, if it be not in conflict with expressed statutory provision. U. S. v. Grimaud. 220 U. S. 506, 31 Sup. Ct. 480, 55 L. Ed. 563; U. S. v. Morehead, 243 U. S. 607, 37 Sup. Ct. 458, 61 L. Ed. 926. The acts of the Commissioner are presumed to be the acts of the Secretary of the Treasury. In re Huttman (D. C.) 70 Fed. 699. Section 628 provides that soft drinks sold by the manufacturer or producer “in bottles or other closed containers” imposes a tax equivalent to 10 per cent, of the price for which so sold. The manufacturer in the course of his business may agree to make a refund upon the return of the container, and, while the selling price of the beverage includes the price of the container, he is entitled, under the departmental regulation, to a rebate upon a proper showing. By the delivery of the beverage a sale is made, and indicates the intent on the part of the manufacturer to sell both. The price is fixed for both. This is reasonable-because the plaintiff in error does not know that the container will be returned for the refund. Reasonable provision is made that, if it is returned, full credit may be obtained, tinder these circumstances, the selling price of the beverage and container are an inseparable total. The tax attaches when the beverage is sold, when the vendor passes title to the purchaser. I think the regulation is a reasonable one and provides fairly for the refund. The phrase “sold by the manufacturer, producer or importer in bottles or other closed containers,” indicates an intent by Congress that the beverage taxed shall be that sold in such closed containers, and that the price upon which the tax shall be imposed is the price charged by the manufacturer at the time he sells and on the total selling price.

*638Our attention is called to Revenue Act Nov. 23, 1921, § 602, which repeals the section of the law under consideration in the present case. In the 1921 act Congress specifically exempts “pure apple cider.” Subdivision (c), § 602. It is argued from this that Congress did not intend to include cider in the definition of “other soft drinks” in the act of 1918. But a statutory provision the meaning) of which is not clear should be construed with reference not only to the statute as a whole, but with reference to contemporaneous and subsequent enacted statutes in pari materia. Where a statute repeals or replaces an earlier law, any change of language is more consistent with the change of intent than with the purpose of defining or declaring the meaning of the language of the earlier repealed statute. U. S. v. A. J. Woodruff & Co., 175 Fed. 776, 99 C. C. A. 348.

The court below, holding that the complaint did not state facts sufficient to constitute' a cause of action, was right, and the judgment rendered for the defendant should be affirmed.