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580, especially where it continued without deviation for over a decade. Cf. United States v. Leslie Salt Co., 350 U.S. 383. The District Court found that "Among engineers, the horsepower of a motor does not mean its nominal horsepower rating but means the actual horsepower which the motor will deliver continuously under its full normal load." The Court of Appeals did not reach that question nor review that finding in view of its conclusion that the horsepower test was not valid. Accordingly we remand the case to the Court of Appeals for consideration of that and any other questions which may remain. And we add that our disposition is without prejudice to such action as the lower courts may deem appropriate to prevent taxpayers, should they ultimately prevail, from obtaining a windfall by reason of taxes collected by them but not paid to the Government.



I would dismiss the writ of certiorari as improvidently granted. The petition urged the substantial question of retroactivity in the Commissioner's exercise of his lawmaking power, in that he attacked in court a prior interpretation by him of the taxing statutes whereby the tax now claimed [713] was not due. As the case finally was presented here no substantial question of retroactivity was presented. Insofar as the retroactivity initially asserted depended upon the reliance of the petitioners, that is apparently governed by § 1108 (b) of the Revenue Act of 1926, 44 Stat. 114, controlling excise taxation, and is in any event not now in issue, for the petitioners stipulated in the trial court and reiterated here that the Commissioner was in no way "estopped" to attack the invalidity of the ruling as petitioners and the District Court construed it. Insofar as the retroactivity asserted was the more general unfairness of a change in the Commisioner's interpretation, it cannot be presented in this case because from the start it has been manifest that the ruling is, to say the least, ambiguous (the Commissioner tried to clarify it in 1957) and reasonably susceptible of both interpretations urged for it, so that any judicial determination of its meaning was bound to affect some taxpayers retroactively. Nor was or is there any basis in the record for saying that the Court of Appeals' rejection of the horsepower test in toto was more severely retroactive in its effect than either construction of the ruling might have been.

The only other contention presented for review is the substantive statutory determination of the Court of Appeals, as to which that court apparently failed to give due weight to the interpretative function of the Commissioner. In light of the confused and cloudy record in this case, this failure cannot be said to be clearly presented since the Commissioner's approach has resulted in a rule which the Court of Appeals found to be "inconclusive and uncertain." Had all this been clear from the start, it would have been apparent, to me at least, that assuming the Court of Appeals to be wrong, there was not such a departure "from the accepted and usual course of judicial proceedings as to call for an exercise of this court's power of supervision." Rule 19, par. 1(b).

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[714] Moreover, this litigation bears many of the earmarks of a feigned suit. Despite the desire of the parties to "test" a question of law, we ought to avoid adjudication in a case with so checkered a course of positions taken by the parties where the particular controversy may well be less than real. The consent required by § 6416 (a)(3) of the Internal Revenue Code of 1954, a precondition for this action, was obtained from the attorney and auditor of the petitioners. It is not too broad an inference to say that the petitioners were, in effect, writing their own consent for bringing this suit. Without further proof, such sales and consent hardly establish the immediate interest of the petitioners in the outcome of this lawsuit, i.e., money loss due to an illegal exaction, not some other suit sought to be made to turn upon it, which is a requisite to adjudication. Cf. Atherton Mills v. Johnston, 259 U.S. 13, 15. Responsibility for the confusing shifts of position during litigation which characterize this record may not unfairly be attributed to the extent to which this action was contrived, and to the stipulations affecting the really substantial interests which were apparently the chief concern for using this action as a pilot litigation. Whether or not a case is feigned must ultimately turn on inferences from the record and history of a litigation. The appearance that it may be, even if not demonstrably calling for dismissal of the proceeding, ought to make the Court doubly unwilling to give its judgment on the substantive questions to be dug out of so dubious a litigation on such a record.

I would dismiss.


The Congress, in 1941, levied an excise tax on "[s]elf-contained air-conditioning units." § 3405 (c), Internal Revenue Code of 1939. The legislative history shows that [715] the Congress intended the tax to "apply to all mechanical refrigerators and refrigerating units [including self-contained air-conditioning units] whether of household or other type." H.R. Rep. No. 1040, 77th Cong., 1st Sess., p. 32. In 1948, the Commissioner issued a ruling, reissued in 1954, which defined self-contained air-conditioning units as those with "a total motor horsepower of less than 1 horsepower."

This suit involves only two self-contained air-conditioning units, but by stipulation of the parties it is a "prototype or test" case to determine the extent of the coverage of the excise tax under § 3405 (c) as to self-contained air-conditioning units. Petitioners contend that "total motor horsepower" as used in the rulings meant actual horsepower rather than that for which the motor is rated by the manufacturer. It was stipulated that each unit had over one actual horsepower, but a manufacturer's rating of three-fourths horsepower. The Government contended that an interpretation that actual horsepower applied would make the rulings "fly in the face of the statute." It argued that the ruling should be interpreted "in [consonance] with the statute so as not to require the Court to strike down the ruling as a nullity and as something that is unreasonable, void, and of no effect." This, the Government asserted, required that "total motor


1 See R. pp. 130-132.

horsepower" be interpreted as manufacturer's rated horsepower. The trial court, however, enforced the rulings as requiring the application of the actual horsepower test. The Court of Appeals reversed, holding that the horsepower test was not permissible under the statute, and that the rulings were void.

The Government's contention that the statute covers all self-contained air-conditioning units is brushed aside by this Court with a finding that such a position is [716] "contrary to the stipulation" which declares the statute restricted to units of the "household type." The Court finds that it "need not consider which view of the statute is correct for under either view we think the horsepower test is a permissible one." It holds that the rulings "were not void." Thus, despite the fact that § 3405 (c) refers solely to "[s]elf-contained airconditioning units" and fails to mention "household type," the Court refuses to resolve this question of statutory construction raised by the Government. It simply remands the case to the Court of Appeals for a determination of whether the ruling meant by its language to refer to actual horsepower, as the District Court found, or to the manufacturer's rated horsepower as posted on the motor itself. I cannot see how any horsepower test under the rulings would be permissible, since it is not mentioned in the statute and is entirely inconsistent with the statute's full coverage. This test was formulated by the industry in meetings that culminated in a letter from the York Corporation to the Commissioner. This letter revealed that York considered the language "[s]elf-contained air-conditioning units" as used in § 3405 (c) to mean "exactly what the common everyday accepted usage of the term implies the unit must be complete within itself." The suggested definition which York made was later promulgated in almost identical language by the Commissioner. York represented it to be "sufficiently broad in its scope to include without exception all self-contained air conditioning units which are now being manufactured." Petitioners admit that they were "at all times material hereto engaged in the manufacture and sale of self-contained air conditioning units." It is further admitted that the units involved here were self-contained ones, "in the sense that all the works are in the same box." They certainly came within the terms of § 3405 (c) as reflected in the York representations. If these representations brought about an [717] erroneous ruling inconsistent with § 3405 (c), then it is void and we should so declare it, as did the Court of Appeals.

Finally, these rulings do not have the force of regulations, and, as petitioners admit, they cannot "overrule a statute." However, if the manufacturer does not collect the tax on a sale because of his reliance on a ruling of the Commissioner holding the sale nontaxable, then "[n]o tax shall be levied, assessed, or collected" on that sale. § 1108 (b), Revenue Act of 1926.2 It follows that if the petitioners did not collect the tax imposed by § 3405 (c) because of the Commissioner's rulings, no tax can now be levied or collected on the same. The Government specifically concedes that if respondents "had relied to their detriment by treating as nontaxable the sale of units with an actual

2 § 1108 (b) of the Revenue Act of 1926, c. 27, 44 Stat. 9, 114: "No tax shall be levied, assessed, or collected

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on any article sold or leased by the manufacturer, . . if at the time of the sale or lease there was an existing ruling, regulation, or Treasury decision holding that the sale or lease of such article was not taxable, and the manufacturer. parted with possession or ownership of such article, relying upon the ruling, regulation, or Treasury decision."

horsepower output of one or more [which is the interpretation placed on the ruling by petitioners and the trial court]-they would be protected [under § 1108(b)] against any retroactive change in administrative position." Conversely, if the manufacturer did not rely on the rulings of the Commissioner and collected the tax under § 3405 (c), then he could not now interpose invalid rulings to bar the Government's recovery from him of the tax he has already collected.

In this connection, no one seems to know what extent the tax has been collected by the industry. Petitioners now seem to admit that they made substantial collections, and the record discloses that other major manufacturers determined "taxability . . . by reference to rated [718] horsepower, whether or not the actual horsepower was different therefrom." It therefore appears that large sums of money have been collected and are now being retained by the manufacturers. This case is based on only two units, purchased by persons connected with the petitioners. Under the stipulation, nevertheless, the result of this case will control the tax on some 50,000 other units not involved here. While the customers who paid the tax might sue the manufacturer therefor, the likelihood of such actions would be highly remote under the circumstances here.

Thus far the Government has received the tax only on the two units involved here. There are no "consents" save on these same two units and these consents were obtained from a lawyer and an accountant of the taxpayers. The entire record and course of this litigation are cloudy, and the parties cannot even agree as to what they "agreed" upon in their stipulations. In light of these circumstances, I think it highly unfortunate that today the Court should enter an order which may permit the manufacturers to keep as a windfall considerable amounts they have charged their customers for "excise taxes."

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