Appeal from the District Court of the United States for the District of Delaware; John P. Nields, Judge.
Before BIGGS, MARIS, and GOODRICH, Circuit Judges.
The question presented for our detrermination by the appeals at bar is the construction of Section 602 1/2, c. 277 of the Revenue Act of 1934, 48 Stat. 680, 26 U.S.C.A. Internal Revenue Acts page 778.
The appellant makes spaps and other products and uses coconut oil, palm oil and other oils in their manufacture. On May 10 1934, the effective date of Section 602 1/2, it had on hand over 78,000,000 pounds of coconut and other oils referred to in the statute which had received one or more domestic processings.After the effective date of the statute these oils were subjected to further processings by the appellant in the manufacture of products intended for sale. The appellant paid the taxes and made claims for refunds which were rejected by the Commissioner. The appellant then sued the United States.
The court below held that the phrases of the statgute, "first domestic processing" and "first use", mean the first domestic processing or first use in the United States after the effective date of the act. See colgate-Palmolive-Peet Co. v. United States, D.C., 37 F.Supp. 794. The pertinent portions of Section 602 1/2 are set out in the margin.*fn1 There is no dispute between the parties as to the meaning of the phrases "domestic processing" or "use in the United States".All concede that the oils subjected to the tax, were processed in the United States both before and after the effective date of the act. The dispute arises as to the meaning of the phrase "the first" as used throughout the statute.
The appellant makes a number of contentions. It refers to the word "first" as defined in Funk & Wagnalls New Standard Dictionary, 1938, as meaning "Prior to all others in time or occurrence; earliest, as the first snow of the season." To this may be added the definition contained in Webster's New International Dictionary, Second Edition, viz., "Preceding all others; foremost; - used as an ordinal of one; as (a) earliest in time or succession; - said of either the past or future, as he was the first to come; the first train leaves at noon; my first voyage; the first year of Independence; (b) foremost in position; - in front of or in advance of all others; as first in the race; * * * " The appellant urges that if the modifying adjective "first" be given its ordinary or normal meaning it must refer to the earliest use or processing in the United States, that which precedes all others in point of time. This interpretation, says the appellant, is the same as that which the Treasury Department put upon the phrase, "the first domestic processing" used in Section 9(a) of the Agricultural Adjustment Act, approved May 12, 1933, c. 25, 48 Stat. 31, 7 U.S.C.A. § 609(a). The appellant contends that Section 602 1/2 of the Revenue Act of 1934 was derived from Section 9(a) of the Agricultural Adjustment Act.
We entertain little doube that the provisions of Section 602 1/2 were derived largely from Section 9(a). The Treasury Regulations (Article 7 of Treasury Regulations 81, approved July 12, 1933) and the amendments thereto promulgated by the Treasury Department in connection with Section 9(a) of the Agricultural Adjustment Act bear out the appellant's assertion that the Treasury Department construed the phrase "the first domestic processing" to mean the first in point to time.*fn2 If the provisions of Sections 9(a) and 602 1/2 are deemed to be in pari materia the two sections should be interpreted similarly. While the Agricultural Adjustment Act placed a floor tax upon commodities already processed. (See Supplementary Revenue Prvisions of the Agricultural Adjustment Act, Section 16(a), c. 25, 48 Stat. 40, 7 U.S.C.A. § 616(a), and the last regulation cited in note 2 supra), Congress did not impose any floor tax under the Revenue Act of 1934.Because of this Section 9(a) and Section 602 1/2 cannot be deemed to be in pari materia even if the commodities named in Section 9(a) be deemed to be the equivalent for tax purposes of the oils referred to in Section 602 1/2.
The appellant contends that the history of the section shows that it was the purpose of Congress to protect domestic farm products against competitive oils brought into this country by levying a compensating tax on the first actual use of such oils within the United States. The appellant takes the position that Congress did not intend to tax any processing after the first processing in poin of time in the United States because such a tax would not effectuate the purpose of Section 602 1/2 which is a substitute for an impost. The appellant points out that when the Revenue Act of 1928, 45 Stat. 791, 26 U.S.C.A. Int. Rev. Acts, page 351, et seq., was under consideration unsuccessful attempts were made by members of Congress from agricultural and cattle-raising states to impose duties upon imported competitive oils including coconut oil. These proposed amendments were rejected.*fn3 In 1929 when the Tariff Act of 1930, 46 Stat. 590, 19 U.S.C.A. § 1001, et seq., was again before Congress, amendments were offered to place imports upon competing foreign oils.*fn4 These proposals were not made law. When Congress had before it the Revenue Act of 1932, 47 Stat. 169, 26 U.S.C.A. Int. Rev. Acts, page 482 et seq., similar amendments were proposed but were rejected again.*fn5 During the Seventy-Second Congress a separate bill, H.R. 12,835, was introduced to provide an amendment to the Tariff Act of 1930 in order to impose a duty on such oils as were processed in the case at bar. This bill did not pass.
The continuous agitation for the protection of domestic farm products from duty-free coconut oil and other competitive vegetable oils resulted in the passage of the statute under consideration. See the statements of Congressman Schallenberger,*fn6 those of Congressman Knutson,*fn7 those of Senator Byrnes,*fn8 those of Senator Borah*fn9 and those of Senator Norris.*fn10 The fact that the Philippine Independence Act of March 24, 1934, c. 84, Section 6 (b), 48 Stat. 456, 459, 48 U.S.C.A. 1236(b), specifically authorized the importation free of duty of 200,000 long tons of Philippine coconut oil a year for ten years made it impossible for Congress to place an impost on Philippine coconut oil without a breach of faith. Congress, in order to protect the American farmer, but also to keep faith with the people of the Philippines, substituted for an impost upon Philippine oil the tax provided by Section 602 1/2. It follows, says the appellant, that Congress intended the tax of 602 1/2 to attach to the earliest use of the oils after entry into the United States and therefore Congress intended to levy the tax upon "the first domestic processing" in point of time.
Our difficulty in accepting these arguments lies in the fact that we can see no reason why Congress should not have desired to protect domestic fats against competitive imported oils whether prior to the passage of the act these had been processed within the United States or not. Obviously Congress could have made its intention very plain by adding a very few words to the phrase "first domestic processing" such as "in point of time", if that body had in mind the end which the appellant contends it had. Upon the other hand if we take the literal meaning of the word "first", we must concede that it means in advance of all others, the earliest.
Two plain sign posts remain to guide us. First, as was stated by the learned trial judge a statute is presumed to operate on future acts unless the contrary intent is declared. See Hassett v. Welch, 303 U.S. 303, 314, 58 S. Ct. 559, 82 L. Ed. 858. A similar view was expressed by the Circuit Court of Appeals for the Second Circuit in Loose-Wiles Biscuit Co. v. Rasquin, 95 F.2d 438, 440, cert. den. 305 U.S. 611, 59 S. Ct. 70, 83 L. Ed. 389.The Court of Claims in the case of Tasty Baking Co. v. United States, 38 F.Supp. 844, reached a similar conclusion, though upon somewhat different reasoning. In our opinion the doctrine of the prospective operation of a statute has become so much a part of our law as to require Congress to employ plain words to overcome the presumption that a statute will so operate.
Second, Treasury Regulations 48 (see note 1, supra) construe the phrase "first domestic processing" as meaning the first use in the United States after the effective date of the Act. The defendant points out that these regulations were promulgated by the Treasury Department pursuant to the provisions of Section 1101 of the Revenue Act of 1926, 26 U.S.C.A. Int. Rev. Acts, page 315. See 44 Stat. 111. Sec. 602 1/2(f) of the Revenue Act of 1934, 48 Stat. 764, provides that all provisions of Section 600 of the Revenue Act of 1926, 44 Stat. 93, 26 U.S.C.A. Int. Rev. Acts, page 275, not inconsistent with the provisions of Sec. 602 1/2 of the Revenue Act of 1934 shall be applicable in respect to the taxes imposed by Section 602 1/2. In effect, therefore, contends the defendant, Treasury Regulations 48 were made applicable to Section 602 1/2 of the Revenue Act of 1934. Since the promulgation of the regulations referred to Congress on one occasion amended Section 602 1/2 without any indication of disapproval of the interpretation of the Treasury Department as to the prospective operation of the statute. By Section 402 of the Revenue Act of 1935, 49 Stat. 1026, 26 U.S.C.A. Int. Rev. Acts, page 810, Congress imposed a compensatory tax upon the importation of articles produced from the oils named in Section 602 1/2.
The United States claims similar approval by Congress by the enactment of Section 702 of the Revenue Act of 1936, 49 Stat. 1742, 26 U.S.C.A. Int. Rev. Acts, page 955, amending Section 602 1/2(a). This contention cannot be sustained, however, because Congress made substantial changes in the wording of Section 602 1/2 though it did refer specifically to the existing regulations in respect to definitions of combinations or mixtures.*fn11 This may indicate some degree of approval by Congress of the interpretation by the regulations of the prospective action of Section 602 1/2(a) as enacted in the Revenue Act of 1934, but since the statute was not reenacted in identical language the rule of congressional confirmation enunciated by ...