The opinion of the court was delivered by: FREED
The Standard Oil Company of Ohio has instituted this suit to recover excise taxes in the sum of $ 158,120.51, plus interest. Standard contends this tax was illegally assessed against, and collected from it, in connection with the sale of gasoline and lubricating oils.
The case was submitted to the Court upon lengthy stipulations and after extended oral testimony. Comprehensive briefs, submitted together with the transcript of the testimony, gave the Court an opportunity to re-examine the facts after trial.
The taxes in question were assessed against Standard and its subsidiaries, Caldwell & Taylor Corporation and Fleet-Wing Corporation, under Section 601(c)(1) and Section 617(a) of the Revenue Act of 1932, 26 U.S.C.A.Int.Rev.Acts, pages 604, 616, and Section 617(a) as amended by Section 211(a) of the National Industrial Recovery Act of 1933, 26 U.S.C.A.Int.Rev.Acts, page 616. These Acts impose a tax upon the sale of gasoline and lubricating oils by a producer. Immediately prior to the effective date of the Acts in question Standard sold certain quantities of gasoline and lubricating oils to its subsidiaries, Caldwell and Fleet-Wing.
In its bill of complaint, Standard contends: (1) That these transactions were in the normal course of business, dictated by sound business practice, (2) that they were bona fide sales made to companies which were independent in operation and separate entities from the parent corporation, (3) that the assessments were unlawful, (4) that its claims for abatement should have been granted and were wrongfully rejected, (5) that it paid all of the unabated portion of the tax so levied, under protest, and filed a timely claim for refund in the Commissioner's office, and (6) that the Commissioner of Internal Revenue was in error when he found the transactions were not bona fide sales, that they were colorable, and that Fleet-Wing and Caldwell were mere instrumentalities and agencies of Standard. It asks judgment in the amount of its payment, plus interest.
The Government, in its answer, denies the Commissioner was in error in rejecting the claim for refund. It asserts: (1) That the taxes in question sought to be recovered by Standard, were not borne by the taxpayer or its subsidiaries, (2) that they were passed on to the ultimate purchasers of the plaintiff and its subsidiaries, (3) that any recovery by Standard would constitute unjust enrichment. It challenges this Court's jurisdiction because the claim for refund relied upon by plaintiff is insufficient.
Before trial the Government filed a motion to dismiss the action, which the Court took under advisement for determination after the matter had been submitted on the merits.
The motion is predicated upon the requirements of the statute and Treasury regulations in question.
' § 621. Credit and Refunds.
Treasury Regulation 44 (1934 Edition):
'Art. 84. Credit and Refunds.
'In all cases where a person overpays tax, no credit or refund shall be allowed (except as provided in the preceding paragraph), whether in pursuance of a court decision or otherwise, unless the taxpayer files a sworn statement explaining satisfactorily the reason for claiming the credit or refund and establishing (1) that he has not included the tax in the price of the commodity with respect to which it was imposed, or collected the amount of tax from the vendee, or (2) that he has either repaid the amount of tax to the ultimate purchaser of the commodity or has secured the written consent of such ultimate purchaser to the allowance of the credit or refund. In the latter case the written consent of the ultimate purchaser must accompany the sworn statement filed with the credit or refund claim. For the purpose of the tax the 'ultimate purchaser' is a person who purchased an article (1) for consumption, or (2) for use in the manufacture of other articles and not for resale in the form in which it was purchased. * * * '
The motion urges that the application for a refund filed before the Commissioner was defective. It further maintains that in this action for the recovery of the taxes there is included a new ground for recovery, neither pleaded nor proved in the claim for a refund before the Commissioner. This contention is mott in view of the fact that, before trial, Standard moved to strike from its bill of complaint the paragraph which raised this issue, which motion the Court hereby grants.
The sworn statement, concluding a lengthy and minute delineation of the exact nature of the claim,which the Government contends was found by the Commissioner to be insufficient to support a claim for refund, is as follows:
'The undersigned, Caldwell & Taylor Corporation and Fleet-Wing Corporation, by their proper officers thereunto duly authorized, hereby join in the foregoing claim for refund, and hereby consent to the granting of such refund as shall be properly allowable and the payment thereof together with interest to the Standard Oil Company (Ohio).
'The undersigned further certify that the entire amount of excise taxes and interest referred to in the foregoing Refund Claim was paid by the Standard Oil Company (Ohio) and that no portion thereof was paid by either of the undersigned.
'Caldwell & Taylor Corporation,
'Sworn to before me and subscribed in my presence this 20th day of May, 1939.
The language of this sworn statement taken together with the claim for refund filed before the Commissioner, in the Court's judgment, means: (1) That Standard paid all of the tax which it is seeking to have refunded to it, and (2) that by its proper officers Fleet-Wing and Caldwell, the purchasers of the gasoline and oil, say that they did not pay any portion of the taxes so assessed.
It is significant to note that the claim before the Commissioner, as it has been in the trial before this Court, is predicated on the proposition that the transactions between Standard and Caldwell and Fleet-Wing were at arm's length, bona fide, and between separate entities.
Standard admits, at the outset of this suit, as it did before the Commissioner, that if the ruling is adverse on these claims, it is liable for the amount of taxes so assessed.
It is evident from the long and involved contention made by the Government with respect to its motion to dismiss, that it believes that a finding by the Commissioner that a proper sworn statement by the taxpayer has not been filed and established is so conclusive upon the Court, that no action for refund may be maintained. In other words, it is the position of the Government that the finding of the Commissioner as to the sufficiency of the sworn statement is a finality, so conclusive upon the Court, that the finding, in and of itself, entitles the Government to the granting of a motion to dismiss the action. It says that this is true despite any ...