#### ATWATER KENT MANUFACTURING CO. v. THE UNITED STATES

[No. D-1026.

Decided June 14, 1926]

*On the Proofs*

*Bosoise tames; timers and coils; automobile parts.*— Timers and coils used on and essential to the functioning of all internal-combustion engines that require the ignition of compressed gas are not automobile parts and are not taxable as such under section 900 of the revenue acts of 1918 and 1921.

*The Reporter’s*statement of the case:

*Messrs. Spencer Gordon*and *Paxson Deeter*for the plaintiff. *Covington, Burling <& Rublee*were on the brief.

*Mr. Ralph C. Williamson,*with whom was *Mr. Assistant Attorney General Herman J. Galloway,*for the defendant.

The court made special findings of fact, as follows:

I. The plaintiff is a corporation duly incorporated under the laws of the State of Pennsylvania.

II. By monthly payments beginning October 23, 1919, and ending with a payment on September 12, 1923, the plaintiff paid the United States manufacturer’s excise taxes in the sum of $87,671.44 under section 900 (3) of the revenue acts of 1918 and 1921, on the sale of timers and coils manufactured by the plaintiff. The first of these payments to the United States was made October 23, 1919, in the sum of $4,313.13. The remaining payments were made beginning November 26, 1919, and ending September 12, 1923, in the sum of $83,358.31.

III. An induction coil such as-is involved herein is composed of two coils of wire. It is used, associated with the timer, in the ignition system of a gas engine as a transformer for stepping up a low battery voltage to a high voltage in order that the high voltage can jump across the spark gap. The battery voltage is put through the primary of the coil, and by the principle of electromagnetic induction and because of a large ratio of turns between the primary and the *420secondary, low battery voltage is stepped up to a high voltage in the secondary. An ordinary induction coil will step up the voltage from 6 volts to 10,000 or 20,000 volts.

A timer such as is involved herein is also used in the ignition system of a gas engine. Timers sometimes go under the name of *“*distributers ” or “unisparkers,” the names being interchangeable. In reality a timer is a mechanical combination consisting of a timer and a distributer. The timer proper is a mechanical device which makes and breaks the primary current in the coil with the proper quickness to induce in the secondary the high voltage that is desired. The distributer part of the apparatus distributes the high voltage to the points where it is desired to have it go. Thus in an engine it distributes it in turn to each of the cylinders. In a four-cylinder engine running at 2,000 revolutions per minute the circuit might be broken by the action of the timer 4,000 times a minute.

IV. Timers and coils are used on and are essential to the functioning of all internal-combustion engines that require the ignition of compressed gas. They are used in motor boats, airplanes, road graders, railway locomotive engines, threshing machines, concrete mixers, water pumps, and hoisting machines, as well as on automobiles. The coil with its make and break device was in use many years before automobiles were invented. The advent of the automobile helped the development of the coil and established a greater market for its sale.

V. The timers manufactured by the plaintiff company were identical in functional operations. The only difference between them was in finish and size and in the device- by which they were able to be attached to the engine. There is nothing about the appearance, size, construction, or operation of any particular timer to indicate that it might not be attached to and used on engines of automobiles, motor boats, airplanes, road graders, railway locomotives, threshing machines, concrete mixers, water pumps, or hoisting machines. By reason of differences in attaching devices, however, there might be some adjustment necessary to fit any particular timer to a particular engine of any of the kinds mentioned, and in any *421case the timer would have to be one which1 was applicable to the number of cylinders of the particular engine. The plaintiff company manufactured timers and coils in accordance with patented principles.

YI. There was no difference in the functional operation of the coils manufactured by the plaintiff company, and the sort of engine for which it was to be used made no difference in its size, construction, or appearance. An expert could not tell for what sort of engine a particular coil was to be used.

VII. Any of the timers and coils manufactured by the plaintiff company could, by adjustment of attachment plate, be used on engines other than automobile engines. There might or there might not be some adjustment necessary in attaching the particular timer or coil to the particular engine, but an ordinary mechanic, or, in fact, any man reasonably familiar with the use of tools, could without difficulty attach any of the timers or coils manufactured by the company to engines other than automobile engines and they would properly function when so attached.

VIII. At least one-half of the output of timers and coils of the plaintiff company went to automobile manufacturers under specific contracts. The balance of the timers and coils manufactured by the plaintiff were used either for replacement on automobiles or were used on engines other than automobile engines and were in no material respect different from those sold under contract with automobile manufacturers.

Plaintiff company never constructed or designed a new or special model of timer or coil at the request of any automobile manufacturer. A selection of the particular timer and coil best adapted to the need of the particular manufacturer would be made after a consultation between the engineers of the contracting parties. None of the contracts between the plaintiff company and the automobile manufacturers prevented the sale of any of the models of timers and coils to persons who would use them on engines other than automobile engines. The timers and coils sold by the plaintiff company were not named after automobiles, boats, *422tractors, or tbe other engines in which they were used. The various models had distinctive Atwater Kent numbers.

IX. Mr. Atwater Kent, the president of the Atwater Kent Manufacturing Co., is a distinguished inventor in the ignition field. He has obtained many patents for timers and coils. The specifications and claims of these patents do not refer particularly to the. use of the timers and coils in automobile engines but to their use in engines generally.

X. It was the practice of the Atwater Kent Manufacturing Co. to designate by a new model number every change in design, however slight, made in a timer or coil. There were many model numbers of timers and coils. The principal difference in the timers is in the shank for attachment to the shaft. Apart from differences of size and finish, the difference in the coils is in the adaptive plate that has to do with the attachment of the coil to the engine on which it is to be used. Some of the models bearing different numbers were almost identical. All timers and coils having the same model number were precisely identical in every respect, both in regard to their general construction and in regard to their method of attachment to the engine. The timers on which tax was paid were of more than 200 different models and the coils were of more than 50 models, each bearing a different model number.

XI. Of the total amount of taxes paid, $34,724.36 represents that part paid as a tax on certain models of timers and coils identical with models also sold during the same period by the plaintiff company for use on stationary and marine engines. Thus, to the extent of $34,724.36, the tax was paid on timers and coils sold to persons in the automobile business and presumably used on automobiles, which were identical in mechanical and electrical construction, size, finish, and attaching devices, and in all other respects, which were absolutely interchangeable with other timers and coils sold by the Atwater Kent Manufacturing Co. to persons not in the automobile business and presumably for use on marine engines or stationary engines.

The evidence does not show whether or not timers and coils of the same model numbers as the remaining: timers and *423coils on which taxes were collected totaling $52,957.08 were sold by the Atwater Kent Manufacturing Co. and used on marine engines or stationary engines.

XII. On October 26, 1923, the plaintiff company filed a claim for refund of the taxes involved in this suit totaling $87,671.44 with the collector of internal revenue at Philadelphia, Pa. This claim was wholly disallowed by letter of the Commissioner of Internal Revenue dated February 16, 1924.

XIII. No part of the total sum of $87,671.44 paid to the United States for these taxes has been repaid to the plaintiff.

XIV. Recovery of the first payment totaling $4,313.13 made October 23,1919, is barred because the claim for refund, was not filed until October 26,1923, and plaintiff has waived claim for the same.

The court decided that plaintiff was entitled to recover $83,358.31, with interest thereon at 6 per cent per annum from September 12, 1923, to the date of judgment, aggregating $97,140.22.

Campbell, *Ohief*Justice,

delivered the opinion of the court:

Recovery is sought of certain taxes which plaintiff was required to pay under section 900 (3) of the "revenue acts of 1918 and 1921 on the sale of “timers and coils” manufactured by it. The Commissioner of Internal Revenue refused to refund the amount collected. The case was referred to a commissioner of this court for a finding and report to the court of the facts. Both parties have requested that the court adopt the findings of the commissioner as the facts of the case, and the court has done this. They also agree that only one question is presented for decision, that one being as stated on the Government’s brief “ whether the timers and coils, on the sale of which plaintiff paid excise taxes, constituted parts within the meaning of said section 900 of the revenue acts of 1918 and 1921.”

The language, so far as this case is concerned, of the two acts is the same and is as follows:

> “ There shall be levied, assessed, collected, and paid upon the following articles sold or leased by the manufacturer, *424producer, or importer, a tax equivalent to the following percentages of the price for which so sold or leased—

> #$$$$$$

> “(3) Tires, inner tubes, parts or accessories for any of the articles enumerated in subdivision (1) or (2) sold to any person other than a manufacturer or producer of any of the articles enumerated in subdivision (1) or (2) five per centum.”

The articles enumerated in subdivision (1) are automobile trucks and automobile wagons, including tires, inner tubes, parts and accessories, therefor, and in subdivision (2) are “ other automobiles and motor cycles ” except tractors.

The timers and coils involved here are, according to the findings, “used on and are essential to the functioning of all internal-combustion engines that require the ignition of compressed gas;” “they were manufactured in accordance with patented principles,” and “ an expert could not tell for what sort of engine a particular coil was to be used.” Any of the timers and coils could, by a simple adjustment of the attachment plate, be used on engines other than automobile engines. Any particular timers might be attached to and used in automobiles or motor boats, airplanes, threshing machines, water pumps, or hoisting machines. The “ coil ” was in use before automobiles were invented. It is used in association with the timer, in the ignition system of a gas engine. It is apparent that the timers and coils “are not specially designed nor primarily adaptable only for use on or in connection with automobiles, but that they are interchangeable and extensively used in many other industries,” to adopt the language of the Bureau of Internal Revenue relative to “ sparks plugs.” See S. T. 426, December, 1923, C. B. p. 308. If the principle thus applied to “ sparks plugs,” which were held not to be “ parts,” be applied to timers and coils the plaintiff is entitled to a judgment.

The defendant argues that the timers and coils “ were parts when sold to make up the dealer’s stock of parts; in fact, they were parts from the time they were manufactured to supply the well-known and ever-increasing demand for such parts.” But the question is not whether they were tlparts” of something after they were attached to the one ' or another kind of machine to which they were attached *425and in which they could function, but whether they were sold as parts of the articles mentioned in subdivisions (1) and (2) of section 900. We agree with plaintiff’s contention that upon the facts found and undisputed these timers and coils were, when sold, “ well-recognized commercial articles, parts of the ignition system of a gas engine, but no more parts of automobiles than they were parts of marine engines or the other kinds of engines ” mentioned. The context shows that the word “parts” referred to in the acts was intended to have and should be given a restrictive meaning.

In *Magone*v. Wiederer, 159 U. S. 555, where the importer, claiming that certain pieces of glass cut in a particular way wTere “ parts ” of clocks, brought suit against the collector to recover alleged overpayments exacted as duties. One of the court’s charges to the jury, to which exception was taken, contained this language: “ And if you find as to those articles, or any of them, that they have several uses to which they are perfectly applicable, then as to those articles your verdict should be for the defendant,” and the Supreme Court sustained the court’s charge. The principle is applicable here when we come to define the meaning of the word parts in the acts in question. Where the articles, as those we are concerned with, are applicable for use in different kinds of machines or appliances and are just as applicable to the one use as to the other they are not distinctively parts of automobiles so as to be taxable under these statutes.

Judgment should be awarded in favor of plaintiff. And it is so ordered.

Geaham, *Judge;*Hat, *Judge;*and Booth, Judge, concur.