Frost Gear Forge Co. v. United States

Full title: FROST GEAR FORGE CO. v. UNITED STATES

Court: Court of Claims

Date published: Nov 2, 1931

52 F.2d 1022 (Fed. Cir. 1931)

Opinion

No. H-454.

November 2, 1931.

Suit by the Frost Gear Forge Company against the United States.

Judgment for plaintiff.

The plaintiff sues to recover the sum of $107,176.55, together with interest thereon from the respective dates of payment, alleged to have been illegally and erroneously assessed and collected by the United States under the provisions of sections 900, subdivision (3) of the Revenue Acts of 1918 and 1921 ( 40 Stat. 1122 and 42 Stat. 291), and section 600, subdivision (3) of the Revenue Act of 1924 ( 26 USCA § 881 note), on sales of ring gears, pinion gears, transmission gears, and differential gears sold during the period from January, 1920, to February, 1926, both months inclusive. The evidence discloses the actual amount of taxes paid during this period totalled $119,329.59.

The issue involved is whether or not the articles in question are "parts" or "accessories" for automobiles and other motor vehicles, within the meaning of the statute.

This case having been heard by the Court of Claims, the court, upon the report of the Commissioner and the evidence, makes the following special findings of fact:

1. Plaintiff is now, and was during all of the times hereinafter mentioned, a corporation duly organized and existing under the laws of the state of Michigan, with its principal office in the city of Jackson, Mich., and was during all of the times hereinafter mentioned engaged in the manufacture and sale of gears.

2. Plaintiff was the corporate successor in 1909 of a partnership which in 1907 began making gears for manufacturers of printing press machinery, pumping machinery, wire-bending machinery, wire fence weaving machinery, machine tools, and repair gears for general purposes. About the middle of 1908, plaintiff's predecessor in business began making gears for use in connection with automobiles. The gears made during the period covered by the plaintiff's petition were the same type as those made by the plaintiff's predecessor when it first began business as a partnership.

3. Gears are instruments for power transmission, and were used for a variety of purposes many years before the advent of the automobile. There have been no inventions involving changes in gear principles since the advent of the automobile.

4. A differential gear is a mechanical device for connecting two shafts lying in the same axial line so that the device ordinarily acts as a coupling, but at the same time permits one shaft, under certain conditions, to be accelerated or retarded with reference to the action or movement of the other. Differential gears were in use in steam driven traction engines and thrashing engines prior to the advent of the automobile.

A pinion gear is the smaller of any two mated gears, and may be either the driving or driven member. Pinion gears were in common use in all types of machinery, where any difference in the size of gears was required, prior to the advent of the automobile.

A ring gear is a ring on which there are teeth cut or cast either externally or internally. The usual reason for making them in the form of a ring is to save machining and make replacement easier. Prior to the advent of the automobile, ring gears were used for wrecking cranes, pile drivers, machine tools, elevator construction, and hoisting apparatus.

A transmission gear is designed for the transmission of power from one shaft to another, sometimes with the same speed and sometimes for increasing or decreasing speed. Transmission gears were in common use in drill presses, lathes, milling machines, gear-cutting machines, and rack-cutting machines prior to the advent of the automobile.

5. During the period involved in this action plaintiff's sales were made chiefly through the activity of personal salesmen, soliciting the orders of manufacturers of power lawn mowers, farm machinery, automobiles, paper boxes, prepared-foods machinery, stationary gas engines, hoists, outboard motors, machine tools, lathes, farm implements, wheels, and to jobbers of gears in general. No sales of complete sets of gears for any automobile were made by plaintiff to automobile manufacturers. Plaintiff never sold gears to garage men or automobile repairmen, except in rare instances when some representative of a garage or repair shop for automobiles would visit plaintiff's warehouse and buy a particular gear.

Approximately seventy per cent. of plaintiff's sales during the period in question were made to jobbers and dealers.

The excise taxes for which this suit is brought were those paid upon these sales of ring, pinion, differential, and transmission gears made to jobbers and dealers during the period covered by the claim.

6. The gears sold to dealers and jobbers by the plaintiff were in the first instance ordered from the plaintiff by submission of the customer's sample or blue print, from which the plaintiff made shop drawings with its own number. Subsequent orders were made under the customer's order number. The item or gear ordered was never designated by the name of the machine or machinery for which it might be made. None of plaintiff's gears was ever marked with the name of any automobile, auto truck, automobile wagon, or motorcycle, neither were the boxes, crates, or containers in which the gears were shipped and delivered so marked.

7. The same kind of gears that were sold to jobbers during the period involved in this action, and on which the tax was paid, were sold to nonautomotive manufacturers such as makers of lace-weaving machinery, spring-coiling machines, and machine-tool gears. These gears were also used in ice-harvesting machines, pipe-threading machinery, well-drilling machinery, and welding machinery.

8. The jobbers who purchased gears from the plaintiff during the period involved in this action sold the same to machinery manufacturers, industrial concerns, garage men, repairmen, unclassified individuals, and to other jobbers. The gears manufactured by plaintiff and sold by jobbers were used in concrete mixers, merry-go-rounds, ballast cleaners, spraying machines, pumps, grinding machines, butter-churning machines, helicopters, dough-raising machines, bread-making machines, oil-well machinery, wrecking cranes, hoists, elevators, motorboats, road-building machinery, cotton gins, and by garages for use in automobiles.

It does not appear from the evidence in the record just what percentage of gears manufactured by plaintiff and sold to jobbers were sold by the jobbers to garages to be used on automobiles, but the sales by jobbers for the nonautomobile uses described above were in sets, singly, in hundreds and thousands. These sales were not occasional, but were normal everyday occurrences.

9. The gears sold by plaintiff were of standard design, and many of them were suitable in automobiles. The gears were of such a standard character as to be interchangeable with gears for motor vehicles for which they were not even catalogued by the jobber.

Likewise, they were interchangeable, with equal facility, for the general purposes and nonautomobile uses described. Plaintiff never at any time advertised that the gears manufactured and sold by it were designed for motor vehicles, but two of the jobbers who bought gears from plaintiff during the times involved in this action published catalogues listing the gears bought from plaintiff, along with gears made by and bought from other manufacturers, as gears suitable for use on designated motor vehicles.

There was no characteristic in the design and construction of these gears to exclude them from sale for ordinary general commercial use. These gears were equally adapted to a variety of uses other than upon motor vehicles and were commonly put to, and commercially sold for, such uses. None of the gears sold by the plaintiff upon which the tax was paid were so designed or constructed as to make them primarily adapted for use on automobiles, automobile trucks, automobile wagons, or motorcycles.

10. Plaintiff made and filed its manufacturer's excise tax returns monthly for the period January, 1920, to February, 1926, inclusive, showing the amount of tax due thereon which was duly assessed on such returns by the Commissioner of Internal Revenue, paid by plaintiff, for the months, in the amounts, and on the dates hereinafter set forth, as follows:

================================================================================= Period | Year | Month | Year | Amount | Date paid --------------------|------|---------------------|------|-------------|---------- Jan. .............. | 1920 | Feb. .............. | 1920 | $ 558 99 | 2/25/20 Mar. .............. | | Apr. .............. | | 373 29 | 4/5/20 Mar. .............. | | Apr. .............. | | 309 84 | 4/30/20 Apr. .............. | | June .............. | | 480 74 | 6/1/20 May ............... | | June .............. | | 714 16 | 6/30/20 June .............. | | Aug. .............. | | 351 56 | 8/7/20 July .............. | | Aug. .............. | | 1,717 17 | 8/31/20 Aug. .............. | | Oct. .............. | | 1,380 84 | 10/1/20 Sept. ............. | | Nov. .............. | | 1,349 50 | 11/1/20 Oct. .............. | | Dec. .............. | | 956 40 | 12/1/20 Nov. .............. | 1920 | Jan. .............. | 1921 | 799 88 | 1/3/21 Dec. .............. | | Jan. .............. | | 2,234 34 | 1/29/21 Jan. .............. | 1921 | Mar. .............. | | 843 88 | 3/4/21 Feb. .............. | | Mar. .............. | | 119 44 | 3/31/21 Mar. .............. | | Apr. .............. | | 739 22 | 4/28/21 Apr. .............. | | June .............. | | 697 50 | 6/2/21 May .............. | | June .............. | | 1,933 11 | 6/29/21 June .............. | | July .............. | | 1,456 93 | 7/28/21 July .............. | | Aug. .............. | | 1,529 48 | 8/30/21 Aug. .............. | | Sept. ............. | | 2,663 44 | 9/27/21 Sept. ............. | 1921 | Oct. .............. | 1921 | 3,089 27 | 10/29/21 Oct. .............. | | Nov. .............. | | 1,224 30 | 11/29/21 Nov. .............. | | Dec. .............. | | 877 32 | 12/29/21 Dec. .............. | | Feb. .............. | 1922 | 1,612 72 | 2/1/22 Jan. .............. | 1922 | Feb. .............. | | 1,358 31 | 2/28/22 Feb. .............. | | Mar. .............. | | 1,586 33 | 3/30/22 Mar. .............. | | Apr. .............. | | 2,117 87 | 4/28/22 Apr. .............. | | May .............. | | 3,558 32 | 5/31/22 May ............... | | June .............. | | 3,635 65 | 6/28/22 June .............. | | Aug. .............. | | 2,453 09 | 8/3/22 July .............. | | Aug. .............. | | 1,390 40 | 8/29/22 Aug. .............. | | Sept. ............. | | 1,761 80 | 9/30/22 Sept. ............. | | Oct. .............. | | 1,724 98 | 10/30/22 Oct. .............. | | Nov. .............. | | 1,503 29 | 11/29/22 Nov. .............. | | Dec. .............. | | 1,928 02 | 12/29/22 Dec. .............. | | Jan. .............. | 1923 | 3,661 42 | 1/29/23 Jan. .............. | 1923 | Feb. .............. | | 1,341 66 | 2/28/23 Feb. .............. | | Mar. .............. | | 1,923 30 | 3/31/23 Mar. .............. | | Apr. .............. | | 2,668 21 | 4/30/23 Apr. .............. | | May ............... | | 4,682 53 | 5/31/23 May ............... | | June .............. | | 4,701 44 | 6/29/23 June .............. | | July .............. | | 3,136 25 | 7/30/23 July .............. | | Sept. ............. | | 2,457 34 | 9/1/23 Aug. .............. | | Sept. ............. | | 3,775 42 | 9/28/23 Sept. ............. | | Oct. .............. | | 1,901 65 | 10/31/23 Oct. .............. | | Nov. .............. | | 2,433 09 | 11/30/23 Nov. .............. | | Dec. .............. | | 2,106 37 | 12/31/23 Dec. .............. | | Jan. .............. | 1924 | 751 39 | 1/31/24 Jan. .............. | 1924 | Feb. .............. | | 1,031 58 | 2/29/24 Feb. .............. | | Mar. .............. | | 1,823 72 | 3/31/24 Mar. .............. | | Apr. .............. | | 2,708 13 | 4/30/24 Apr. .............. | | May ............... | | 3,076 30 | 5/29/24 May ............... | | June .............. | | 2,807 39 | 6/27/24 June .............. | | July .............. | | 1,400 86 | 7/30/24 July .............. | | Aug. .............. | | 3,236 39 | 8/30/24 Aug. .............. | | Sept. ............. | | 1,893 19 | 9/30/24 Sept. ............. | | Oct. .............. | | 1,152 89 | 10/31/24 Oct. .............. | | Nov. .............. | | 830 74 | 11/29/24 Nov. .............. | | Dec. .............. | | 1,215 59 | 12/31/24 Dec. .............. | | Jan. .............. | 1925 | 827 15 | 1/31/25 Jan. .............. | 1925 | Feb. .............. | | 990 26 | 2/28/25 Feb. .............. | | Apr. .............. | | 856 27 | 4/1/25 Mar. .............. | | Apr. .............. | | 907 42 | 4/30/25 Apr. .............. | | May ............... | | 909 69 | 5/29/25 May ............... | | June .............. | | 958 00 | 6/30/25 June .............. | | July .............. | | 893 68 | 7/30/25 July .............. | | Aug. .............. | | 894 62 | 8/28/25 Aug. .............. | | Sept. ............. | | 792 86 | 9/30/25 Sept. ............. | | Oct. .............. | | 649 06 | 10/30/25 Oct. .............. | | Nov. .............. | | 682 84 | 11/28/25 Nov. .............. | | Dec. .............. | | 673 77 | 12/31/25 Dec. .............. | | Jan. .............. | 1926 | 424 38 | 1/30/26 Jan. .............. | 1926 | Feb. .............. | | 607 74 | 2/27/26 Feb. .............. | | Mar. .............. | | 523 62 | 3/31/26 | | | |-------------| | | | | $119,329 59 | --------------------------------------------------------------------------------

11. On March 3, 1925, plaintiff filed its claim for refund No. 343280 of manufacturer's excise tax so paid on gears for the period January, 1920, to December, 1924, inclusive, in the amount of $97,455.24, which was duly rejected by the Commissioner of Internal Revenue on November 16, 1925.

12. On April 2, 1925, plaintiff filed its claim for refund No. 344180 of manufacturer's excise tax so paid on gears for the periods September, 1921, and October, 1923, in the amount of $2,334.99, which was duly rejected by the Commissioner of Internal Revenue on November 17, 1925.

13. On May 28, 1927, plaintiff filed its claim for refund No. 10381 of manufacturer's excise tax so paid on gears for the period January 1925, to February, 1926, inclusive, in the amount of $7,386.32, which was duly rejected by the Commissioner of Internal Revenue on August 6, 1927.

George M. Morris, of Washington, D.C. (Don T. McKone, of Jackson, Mich., and KixMiller, Baar Morris, of Washington, D.C., and Bisbee, McKone, Wilson King, of Jackson, Mich., on the brief), for plaintiff.

Ralph C. Williamson, of Washington, D.C., and Charles B. Rugg, Asst. Atty. Gen., for the United States.

Before BOOTH, Chief Justice, and WHALEY, WILLIAMS, LITTLETON, and GREEN, Judges.

WHALEY, Judge.

The plaintiff is a manufacturer of several kinds of gears; i.e., pinion, ring, differential, and transmission. It is the successor to a partnership which had been making these gears for printing presses, pumping machines, wire-bending machines, and many other classes of machinery for many years prior to the advent of the automobile, auto truck, or motorcycle.

This suit is brought to recover taxes paid under sections 900, subdivision (3) of the Revenue Acts of 1918 and 1921 ( 40 Stat. 1122, 42 Stat. 291), and section 600, subdivision (3) of the Revenue Act of 1924 ( 43 Stat. 253, 322 [ 26 USCA § 881 note]), on sales of gears used in automobiles as "parts" or "accessories." We deem it unnecessary to quote these sections, as they have been set out at length in previous opinions of this court. It is quite apparent from the facts in the special findings of the court that these gears had been in general use for many years prior to the invention and manufacture of motor driven cars. Atwater Kent Mfg. Co. v. United States, 62 Ct. Cl. 419.

During the period involved in this suit the sales of the plaintiff covered a wide latitude of uses of these gears by manufacturers of various and sundry kinds of machinery. The gears were used in lawn mowers, farming machines, special engines, outboard motors, and various mechanical devices.

When the motor-driven vehicles came into use, the field for the use and sale of these gears was expanded, and grew in proportion to the increase in the manufacture of this class of vehicle. But the characteristics of the gears remained the same. There was no special design for automobiles. The dimensions and sizes varied in different makes of cars and trucks, but the gears used in, and adaptable to, one make of car could be used in another make of car and in other kinds of machinery, and the gears used in other kinds of machinery could be used in motor vehicles; they were interchangeable. The plaintiff did not advertise any special gear for automobiles, but sold to jobbers by numbers and sizes, and the jobbers sold to manufacturers of various mechanical appliances in the same manner. The mere fact that garages and repair shops kept these gears in stock as replacement parts does not by itself stamp the articles as parts and accessories for automobiles alone. These gears are commercial articles ordinarily sold for general use, and not specially designed or primarily adapted for use in motor vehicles. Universal Battery Co. v. United States, 281 U.S. 580, 50 S. Ct. 422, 74 L. Ed. 1051; Weeks v. United States, 42 F.2d 325, 70 Ct. Cl. 374, and Dutton Sons Co. v. United States, 48 F.2d 454, 72 Ct. Cl. ___.

The refund claims should have been allowed by the Commissioner of Internal Revenue. The plaintiff is entitled to recover the sum of $119,329.59, with interest. It is so ordered.