U.S. Supreme Court
WEBRE STEIB CO. v. C.I.R., 324 U.S. 164 (1945)
324 U.S. 164
WEBRE STEIB CO., Limited,
v.
COMMISSIONER OF INTERNAL REVENUE.
No. 148.
Argued Dec. 13, 1944.
Decided Feb. 12, 1945.
[324 U.S. 164, 165]
Messrs. C. J. Batter and Wm. A. Sutherland, both of Washington, D.C.,
for petitioner.
Miss Helen R. Carloss, of Washington, D.C., for respondent.
Mr. Justice JACKSON delivered the opinion of the Court.
This is a proceeding brought for recovery of sugar processing taxes paid
under the Agricultural Adjustment Act of 1933, 7 U.S.C.A. 601 et seq. The
Commissioner having denied in entirety the taxpayer's claim for $ 8,167.97,
the total tax paid by it, taxpayer petitioned for review by the Processing
Tax Board of Review, as provided by statute. 49 Stat. 1749. The Board
awarded refund in the amount of $3,655.82, and motions for rehearing made by
both parties were denied by the Tax Court, which had succeeded to the
jurisdiction of the Processing Tax Board of Review. 56 Stat. 798, 967 ,
510(a), 7 U.S.C.A. 648 note. On appeal, the Court of Appeals for the Fifth
Circuit reversed and held that the claim should be denied. 140 F.2d 768. We
took the case to review questions of application of the 'prima facie
evidence' and 'presumption' sections of Title VII, Revenue Act of 1936, on
which there was conflict in the circuits. Commissioner v. Bain Peanut Co., 5
Cir., 134 F.2d 853, certiorari granted 320 U.S. 721 , 64 S.Ct. 36, dismissed
on motion of petitioner 321 U.S. 800 , 64 S.Ct. 633; Helvering v. Insular
Sugar Refining Corp., App.D.C., 141 F.2d 713; cf. E. Regensburg & Sons v.
Helvering, 2 Cir., 130 F.2d 507.
A new administrative procedure for recovery of taxes paid under the
Agricultural Adjustment Act was provided
[324 U.S. 164, 166] by Title VII of the Revenue
Act of 1936, 901-917, 49 Stat. 1747, 7 U.S. C. 644-659, 7 U.S.C.A. 623 note,
644-659, repealing 21(d), (e), and (g) of the 1935 amendments to the
Agricultural Adjustment Act, 49 Stat. 771-773. The provisions were reviewed
at length and their constitutionality upheld in Anniston Mfg. Co. v. Davis,
301 U.S. 337 , 57 S. Ct. 816. In outline, so far as relevant to this case,
they are as follows: The claimant is required to prove that he bore the
burden of the tax. 902. Average 'margins' per unit of the commodity
processed, consisting of the difference between cost of the commodity (plus
tax paid, if any) and gross sales value of the articles resulting from the
processing, are to be computed for the tax period and a base period; the
base period is the period two years preceding imposition of the tax and the
six months thereafter (February to July, 1936). 907(b), (c). If the margins
for the tax period are lower than those for the base period, it is 'prima
facie evidence' that, to that extent, the claimant bore the burden of the
tax; if they are not lower, it is 'prima facie evidence' that none of the
burden was borne by the claimant. 907(a). But this 'presumption' may be
rebutted either by the claimant or by the Commissioner, by proof of 'the
actual extent' to which the claimant shifted the tax to others. Such proof
may include, but is not limited to, certain types of evidence described by
the statute. 907(e).
For our purposes the material facts must be gleaned from the findings and
memorandum of the Board of Review and a stipulation filed by the parties in
the Court of Appeals.
Petitioner is a grower and purchaser of sugarcane, which it processes
into direct-consumption sugar and edible molasses. 1
It operates during the months of October,
[324 U.S. 164, 167]
November, and December of each year. The tax went into effect on June
8, 1934 and petitioner paid taxes until November 8, 1935, so that it paid
processing taxes-$7,067.12 on sugar and $1,102.85 on molasses-for the months
of October, November and December 1934 and October and November 1935. Its
average statutory margin for this period was $.01192, and the total number
of units processed was 2,256,676 pounds of sugar. Petitioner's base period
consisted only of the two years prior to the tax because it did no
processing in the six months February to July 1936. Its average statutory
margin per unit for the base period was $.01354. Thus the margin during the
tax period was $.00162 per unit lower than that during the base period,
creating 'prima facie evidence' that petitioner had borne the tax to the
extent of $3,655.82, the amount of refund allowed by the Board. Petitioner
contends that this amount should have been increased by including in the
margins its first processing after invalidation of the Agricultural
Adjustment Act, which was its processing of the 1936 crop, October 1936 to
January 1937. The average margin per unit for this period, computed as for
the base period, was $.01582, or $. 00228 more than the base-period margin.
Evidence that the tax was not borne by petitioner was as follows:
Universal increases in the sale price of sugar were effected on the date of
imposition of the processing tax in the amount of $.55 per hundred pounds,
to cover the amount of the tax. All of the accounts stated between
petitioner and its broker, E. A. Rainold, Inc., respecting sales of molasses
made through that broker, included the processing tax as a separate item and
as an addition to the sale price of the article. 'An account sale, typical
of all such accounts, respecting the sale of sugar, made through
[324 U.S. 164, 168]
its said broker' bore the notation, 'Golden Ridge, 100 Pkts. 10,000#
@3.71 õ $371.00. F.O.B. Pltn. Tax Pd. Tax 0.526õ,' $.526 being the
prevailing rate of processing tax at the time the particular account was
rendered. A letter from the broker Rainold to petitioner, dated January 17,
1936, contained the following: 'According to memorandum you furnished us on
processing tax you paid on 298,017 pounds of sugar, and we have accounted to
you for there (three) cars of 800 pockets and part car of 300 pockets and
when we get paid for balance of this part car, or 500 pockets, it will total
3200 pockets or 320,000# on which the processing tax was included in the
price. Therefore you have not paid anymore tax than you collected and these
sugars in warehouse here and elsewhere, that is Chicago, or (are) really tax
free.'
On the foregoing facts the Board of Review found that 'The extent to
which the processing tax (was) paid and borne by the petitioner and not
shifted to others in any manner whatsoever is $3,655.82,' and it awarded
refund in that amount. This award was based, the Circuit Court of Appeals
thought, 'upon the theory that the claimant had established facts sufficient
to invoke the statutory presumption that it had borne the burden of the tax'
to that extent. In the view of the Court of Appeals, however, the evidence
'clearly was sufficient to dissolve the presumption, and since there was no
other proof to support any refund, the claim should have been disallowed in
its entirety.'
Our first question is whether the Board was entitled to base an award
upon the statutory 'prima facie evidence' or 'presumption,' or whether the
Government's evidence removed the presumption from the case as a matter of
law. For, although the Board did not state how it arrived at its award, it
seems likely that it relied upon the prima facie evidence provisions and not
upon a weighing of the [324
U.S. 164, 169] evidence; petitioner does not assign error to
the contrary, although it contends that the evidence supports the Board's
award.
The statute, unfortunately, is beset by the ambiguity and the imprecision
of definition which are not uncommon with respect to presumptions. But the
difficulties of the subject will not excuse us from the duty to apply as
best we may a statute Congress has seen fit to enact. At one point it speaks
only of 'prima facie evidence' and at another it refers to the prior section
as creating a 'presumption.' 'Prima facie evidence' alone might be taken to
signify only a permissive inference, indicating that the Commissioner or the
courts might, if they saw fit, permit a recovery solely on the basis of the
margin evidence. See Crane v. Morris' Lessee, 6 Pet. 598, 621; Bailey v.
Alabama, 219 U.S. 219, 234 , 31 S.Ct. 145, 149; 9 Wigmore on Evidence (3d
ed. 1940) 2494. But the statute's later use of the word 'presumption' and
the careful detail with which the margin evidence and rebuttal evidence are
described argue against such an interpretation, as does the legislative
background. A committee report on Title VII, explaining the necessity for
amending the existing refund provisions, stated: 'It has been contended that
while that section ( 21(d) of the Agricultural Adjustment Act) states the
conditions under which the Commissioner may deny a refund of taxes paid, it
does not establish affirmatively any conditions, compliance with which will
enable the claimant to secure a refund.' Sen.Rep. 2156, 74th Cong., 2d Sess.,
p. 33. From this it seems clear that the new provision was meant to
prescribe a minimum of proof which would require refund in the absence of
opposing evidence. Therefore the inference arising from the margin evidence
must be a compelled one.
The statute does not tell, however, on what event the existence of the
presumed fact must cease to be assumed
[324 U.S. 164, 170] by the trier. Does the
presumption cease to operate as soon as the Commissioner has met the burden
of going forward with evidence to show shifting of the tax, or does it place
on him the burden of proof? The Government and the court below, taking the
former view, support it with the contention that 'It is never the function
of a rebuttable presumption to shift the burden of proof.' Commissioner v.
Bain Peanut Co., 5 Cir., 134 F.2d 853, 857. It is unnecessary for us to take
so broad a ground, even if it is correct. 2
Dealing only with the particular presumption now before us, we find nothing
to indicate that Congress attached exceptional probative value to the margin
evidence, or that it desired for any other reason to tilt the scales sharply
against the Commissioner rather than merely to even them somewhat in behalf
of claimants. There is, for example, no reason to suppose that the
Commissioner is better able than the processor to prove where the tax burden
fell. On the other hand, the special problem here of preventing unjust
enrichment, added to the usual strict examination of claims against the
Government, convinces that Congress probably intended to leave the burden of
proof on the claimant. Cf. United States v. Jefferson Electric Mfg. Co., 291
U.S. 386 , 54 S.Ct. 443.
In the absence of any clearer statement in the statute, therefore, we
think the presumption is given adequate effect if the burden is placed on
the Commissioner of going [324
U.S. 164, 171] forward with evidence sufficient to support a
finding that the claimant did not absorb the tax. Once such evidence is
presented, the presumption becomes inoperative and the issue is to be
determined as if there had never been a presumption. The statute declares,
however, that the presumption may be rebutted by proof of 'the actual
extent' to which the burden of the tax was shifted. This language appears to
mean that the presumption may be rebutted pro tanto, and not necessarily all
at once or not at all. Thus it does not cease to operate on introduction of
evidence merely sufficient to support a finding that some of the tax was
shifted. It must be evidence sufficient to support a finding that the entire
tax was shifted. Short of that, the presumption is not eliminated but only
diminished to the extent that the rebuttal evidence will support a
contradictory finding. See E. Regensburg & Sons v. Helvering, 2 Cir., 130
F.2d 507, 509. When the margins are unfavorable to the taxpayer and
favorable to the Commissioner, it is unnecessary, of course, to place a
burden of going forward with evidence on the claimant, for he has that
burden anyway, as well as the burden of proof. Whether this means that the
statute's language making the presumption operate in favor of the
Commissioner is superfluous, or that in such a case the presumption must be
given a different effect than when in favor of the claimant, we do not now
decide. Cf. E. Regensburg & Sons v. Helvering, supra.
On the view we take of the statute, the proof introduced by the
Commissioner made the presumption inoperative. We certainly could not say
that, viewed by itself, the Commissioner's evidence would not permit a
finding that petitioner shifted the entire burden of the tax. It tended to
show that in all dealings with its broker the petitioner added the amount of
the tax to the sale price and itemized it separately. That this was true as
to all sales of molas- [324
U.S. 164, 172] ses seems to be conceded. It was also true, or
so it might be found, as to a substantial part of the sugar sales and
therefore inferentially as to all such sales. Petitioner raises some
question as to the proper inference to be drawn from the sugar account and
the broker's letter quoted above. But at least the broker's remarks that
'the processing tax was included in the price' and 'Therefore you have not
paid any more tax than you collected' are unmistakable in their meaning. All
of this evidence is among the kinds expressly mentioned by the statute as
tending to rebut the presumption. More important, the statute appears
specifically to provide that introduction of any evidence of this particular
kind shall be sufficient to rebut the entire presumption. It states that the
presumption may be rebutted by proof that the claimant modified sales
contracts to reflect the initiation, termination, or change in amount of the
tax, or 'at any such time' changed the sale price of the article, or 'at any
time' billed the tax as a separate item, or indicated 'by any writing' that
the sale price included the amount of the tax. It then declares, 'but the
claimant may establish that such acts ... do not represent his practice at
other times.' 907(e)(2). This seems clearly to mean that when any examples
of the named practices are proved, it may be inferred that they represent
the uniform practice of the claimant and the burden becomes his to prove
that they do not. Since the Commissioner proved that not only in a few cases
but in a great number the tax was indicated in writing to be included in the
sale price, we think there is no doubt that he fully rebutted the
presumption within the meaning of the statute.
The second question is whether, with the presumption out of the case,
there is evidence from which the Tax Court would be entitled to award a
refund to petitioner in any amount. The court below, although it remanded
the [324 U.S. 164, 173]
cause, apparently meant for it to be dismissed, for it said, 'since
there was no other proof to support any refund, the claim should have been
disallowed in its entirety.' Literally, of course, this cannot be true, for
the margin evidence remained in the case for whatever it might be worth
apart from the presumption. With this the Government agrees, and it concedes
that, unless we can say that the evidence would not rationally support a
finding in favor of petitioner, the case must go back to the Tax Court for
decision on the evidence rather than on the presumption. We must determine
whether there is evidence which is legally sufficient for administrative
action, but we may not weigh it. Dobson v. Commissioner, 320 U.S. 489 , 64
S.Ct. 239.
The fact that margins for the tax period are lower than those for the
base period has some logical tendency to establish that the burden of the
tax was borne by the processor. See Anniston Mfg. Co. v. Davis, 301 U.S.
337, 354 , 57 S.Ct. 816, 824. There are, to be sure, other and conflicting
inferences which may also be drawn. As the margins are defined, the drop
might be due to a decline in the demand for the processed goods, or to a
decrease in the yield of the raw commodity, or to an increase in the price
of the raw commodity. But we have no basis for saying that the margin thus
defined does not tend to be comparatively stable and that a fall coincident
with imposition of a tax would not more likely reflect the tax than a change
in other factors. We suppose the taking of average margins over a base
period has some tendency to produce that result. And the Tax Court's special
experience might support such an inference. Cf. Dobson v. Commissioner,
supra. Congress apparently believed that the rational connection was strong
enough to justify basing a finding of absorption on the margin evidence
alone. For, as we have seen, Congress intended that in a case where the
margins were [324 U.S. 164,
174] favorable to the claimant and no other evidence was
introduced the claimant should be entitled to a refund, and there appears no
reason of convenience or policy which would lead to such a rule in the
absence of rational connection. For all these reasons we think a finding of
absorption which was based solely on the margin comparisons would not be
irrational.
Nor is the Commissioner's evidence so conclusive as to deprive the margin
evidence of all significance. It permits but does not require a finding that
petitioner had a uniform practice of billing the tax as a separate item.
Even though such a practice be inferred, there is no evidence to show how
far petitioner succeeded in its effort to pass the tax on, except for the
evidence that there was a general rise in the market on a date some months
before petitioner's processing began. The margins are some evidence that the
price may not have responded continuously to the effort to shift the tax.
The fact may be that neither side's evidence goes very far toward
demonstrating where the burden of the tax fell;3 the inquiry is at best a
difficult one. But we do not think it can be said that the record is devoid
of rational support for a finding that petitioner absorbed some of the tax.
Accordingly we must remand the case for a weighing of the evidence,
including, of course, such further evidence as the Tax Court may think it
proper to receive in view of the way in which the case has been tried. In
doing so we intimate no opinion, of course, as to whether petitioner has
sustained the burden of proof placed upon it by the statute.
Since the case must go back, it is necessary to pass upon a further
question raised by petitioner. Petitioner, as we have noted, was not
processing during the six months,
[324 U.S. 164, 175] February to July 1936,
designated by the statute for computing margins after the tax period. For
such a case the statute provides: 'If during any part of such period the
claimant was not in business ... the average prices paid or received by
representative concerns engaged in a similar business and similarly
circumstanced may with the approval of the Commissioner, where necessary for
a fair comparison, be substituted in making the necessary computations.'
907(c). Contending that there were no similarly circumstanced concerns,
petitioner sought to use the figures of a later period, that of its own 1936
production, in computing the base- period margins, which would have made
those margins higher. We think the Board and the court below were correct in
holding that the statutory method of making a prima facie case is exclusive
and that the 1936 evidence might not be so used. The statute's restrictions,
however, have reference only to the presumption; they do not exclude other
evidence generally relevant on the issue of whether the tax burden was
shifted. The 1936 experience, though it could not help petitioner to create
a favorable presumption, was entitled to be given whatever probative value
it might independently have had and, subject to the usual principles of
admissibility, was therefore admissible. Anniston Mfg. Co. v. Davis, 301
U.S. 337, 355 , 356 S., 57 S.Ct. 816, 824, 825
The judgment below is modified and the cause is remanded to the Circuit
Court of Appeals with directions to remand to the Tax Court for proceedings
in conformity with this opinion.
Modified and remanded.
Mr. Justice RUTLEDGE, dissenting.
I doubt that Congress intended to involve the award of refunds of
processing taxes in the abstruse learning of 'disappearing presumptions.' In
my opinion the terms 'prima facie evidence' and 'presumption' may be taken
[324 U.S. 164, 176]
to have been used interchangeably in the statute. I think no more was
intended than to authorize a finding in accordance with the margin evidence,
if no other were presented; and in case opposing evidence should be offered,
to allow inference either way according to the weight of the proof, taking
into account the margin evidence. Hence, in this aspect of the case, I would
rest on the decision of the Processing Tax Board of Review, which on the
record reasonably may be considered to have been reached in this manner.
I also think the statute forbids going outside the base periods
prescribed for comparative data. To hold otherwise would nullify the base
period provisions of the Act, which I think are valid. The cause of action
here rests on a waiver of the sovereign immunity to suit which Congress may
make upon such conditions as it chooses. Nichols v. United States, 7 Wall.
122; Luckenbach S.S. Co. v. United States, 272 U.S. 533, 536 , 47 S.Ct. 186,
187; State of Minnesota v. United States, 305 U.S. 382, 388 , 59 S.Ct. 292,
295. Allowing in the evidence concerning other periods, though not for the
purpose of computing margins, accomplishes indirectly what the base period
provisions were designed to prohibit.
Accordingly, I think the judgment of the Circuit Court of Appeals should
be reversed, with directions to affirm the decision of the Processing Tax
Board of Review.
Mr. Justice BLACK concurs in these views.
Footnotes
[ Footnote 1 ] This processing was subjected
to tax by the Act of May 9, 1934, c. 263, 48 Stat. 670, amending the
Agricultural Adjustment Act. See especially 9(d)(6) (A) and (B) of the Act
as amended, 7 U.S.C. 609(d)( 6)(A), (B), 7 U.S.C.A. 609(d)(6)(A, B).
[ Footnote 2 ] But see, e.g., Morrison v.
California, 291
U.S. 82 , 88-91, 54 S.Ct. 281, 284, 285; Page v. Phelps, 108 Conn. 572,
143 A. 890; Weber v. Chicago, R.I. & P.R. Co., 175 Iowa 358, 151 N.W. 852,
L.R.A.1918A, 626; Bond v. St. Louis-San Francisco R. Co., 315 Mo. 987, 288
S.W. 777; Holzheimer v. Lit Brothers, 262 Pa. 150, 105 A. 73; Morgan,
Instructing the Jury upon Presumptions and Burden of Proof (1933) 47
Harv.L.Rev. 59, 77-83, Some Observations Concerning Presumptions (1931) 44
Harv.L.Rev. 906; Bohlen, Studies in the Law of Torts (1926) 636, 637,
648-653; American Law Institute, Model Code of Evidence, Rule 703.
[ Footnote 3 ] See Johnson, AAA Refunds: A
Study in Tax Incidence (1937) 37 Col.L. Rev. 910.
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