Source: https://supreme.justia.com/cases/federal/us/301/337/
Timestamp: 2019-04-23 03:57:30+00:00

Document:
1. The right to sue the Collector for recovery of taxes exacted under an unconstitutional statute may, consistently with the Fifth Amendment, be abolished if a fair and adequate remedy directly against the Government be substituted. P. 301 U. S. 341.
2. With respect to the refunding of "floor stock taxes" collected under the Agricultural Adjustment Act of 1933, the Revenue Act of 1936, Title VII, § 905, preserves to the taxpayer the remedy by suit against the United States in the District Courts or the Court of Claims. P. 301 U. S. 343.
and provides for a judicial review of the Board's decisions in which may be determined every question of law which. the claimant is entitled to raise, whether general, statutory, or constitutional, including questions as to the validity of any part of Title VII itself, and in which the reviewing court is empowered to direct the Board to enter any designated judgment, the Commissioner of Internal Revenue being required to refund any amount which may thus be found due the claimant. P. 301 U. S. 343.
4. With respect to the refunding of such processing taxes, the Revenue Act of 1936, supra, provides, Title VII, § 902(2), that no refund shall be allowed unless the claimant establishes to the satisfaction of the Board of Review that he bore the burden of the amount paid as tax and "has not been relieved thereof nor reimbursed therefor nor shifted such burden, directly or indirectly" through the inclusion of the amount paid in the price of the product, through reduction of the price paid for the raw material, or "in any manner whatsoever."
(1) If the taxpayer has thus shifted the burden of the tax, he is no longer in a position to claim an actual injury, and the refusal of a refund in such a case cannot be regarded as a denial of constitutional right. P 301 U. S. 348.
(2) The fact that the Act makes no provision for refunding to particular persons, to whom the burden of the invalid exaction may be found to have been shifted, is no concern of the taxpayer. P. 301 U. S. 350.
(3) The statute should not be construed as denying a refund where, from the nature of the case, proof that the tax burden was not shifted is inherently impossible; but the existence of such impossibility is a question of fact which the claimant may raise before the Board; the claimant is required to present to the Board the facts pertaining to the subject, and thereupon it becomes the duty of the Board, upon findings supported by evidence, to make its determination in accordance with the legal rights of the claimant, subject to modification or reversal by the reviewing court if not in accordance with law. P. 301 U. S. 351.
Constitutional questions are not to be decided hypothetically. When particular facts control the decision, they must be shown.
(4) Of two possible constructions of a statute, that one should be adopted which will save, and not destroy, it. An intent to defy the Fifth Amendment or even to come so near to doing so as to raise a serious question of constitutional law cannot be attributed to Congress. P. 301 U. S. 351.
(5) Section 902 is not too vague; it lays down the general principle governing the remedy afforded, leaving its applications to be determined by facts as they appear in particular instances. P. 301 U. S. 353.
5. Section 907(a) of Title VII of the Revenue Act of 1936 provides that, in the administrative proceedings above mentioned, the fact that the average margin per unit of commodity processed was lower during the tax period than the average margin during the period before and after it shall be prima facie evidence that the burden of the processing tax was borne by the claimant taxpayer, and that, if the average margin during the tax period was not lower, it shall be prima facie evidence that none of the burden of such amount was borne by the claimant, but that it was shifted to others. "Tax period" and "period before and after the tax" are defined. Section 907(e) provides that either the claimant or the Commissioner may rebut the presumptions "by proof of the actual extent to which the claimant shifted to others the burdens of the processing tax." Held that the words "actual extent" are used in contradistinction to the presumed extent, according to the prima facie presumption to which the proof in rebuttal is addressed, and that complete opportunity is afforded the claimant to present any evidence which may be pertinent to the questions to be determined by the Board of Review and which may be appropriate to overcome any presumption which might be indulged either under § 907(a) or otherwise. P. 301 U. S. 354.
6. Section 906(b) of the Act of 1936, Title VII, supra, provides that the hearing before the Board is to be conducted by a presiding officer who is either a member of the Board or an officer or employee of the Treasury Department designated by the Secretary of the Treasury, and § 906(e) that the presiding officer is to recommend to the Board, or a division, findings of fact and a decision; but the Board, or a division of it, is required to consider the evidence and make the findings and administrative decision, and the whole scheme of the administrative proceeding presupposes hearing and determination in accordance with the demands of due process. P. 301 U. S. 356.
to recover amounts paid as cotton "processing" taxes and as cotton "floor stock" taxes under the Agricultural Adjustment Act of 1933, which was held unconstitutional by this Court in United States v. Butler, 297 U. S. 1.
unconstitutionality of these provisions. Demurrer was sustained by the District Court (Lincoln Mills v. Davis, 15 F.Supp. 257), and its judgment of dismissal was affirmed by the Circuit Court of Appeals upon the ground that the court below was without jurisdiction to entertain the action. Anniston Mfg. Co. v. Davis, 87 F.2d 773. In view of the importance of the questions raised, we granted certiorari.
Title VII, §§ 901-917, of the Revenue Act of 1936 provided a new administrative procedure for the recovery of amounts collected under the Agricultural Adjustment Act. Section 901 repealed §§ 21(d), 21(e), and 21(g), of the amendments of 1935 (49 Stat. 771-773). Section 902 prescribed the conditions on which refunds should be made. Section 903 related to the filing of claims. Sections 904 and 905 prescribed periods of limitation and provided for the jurisdiction of the District Courts, concurrent with the Court of Claims, for the recovery of amounts collected as floor stock and compensating taxes. Section 906 prescribed the procedure on claims for refunds of processing taxes. Section 907 established certain rules of evidence or presumptions to be observed in the administrative proceeding. Section 908 related to allowance of interest. Section 909 denied review of the administrative ruling by any other administrative or accounting officer. Section 910 undertook to free collectors from liability for moneys collected by him and paid into the Treasury in performance of his official duties. Section 913 defined various terms employed. Other sections laid down administrative rules not requiring attention in the present discussion.
the amounts collected, and that § 910, which attempted to destroy that liability, is unconstitutional.
remedy offered is adequate and backed by the responsibility of the State."
The same reasoning is applicable here. The government has not denied its obligation to refund the amounts found in the authorized proceeding to be recoverable, but has recognized that obligation. In such a case, the substitution of an exclusive remedy directly against the government is not an invasion of constitutional right. Nor does the requirement of recourse to administrative procedure establish invalidity if legal rights are still suitably protected. The immediate question is whether the authorized proceeding affords a fair and adequate remedy. We accordingly inquire whether the prescribed procedure gives an opportunity for a full and fair hearing and determination of all questions of fact and adequately provides for the protection of the legal rights of the claimant, embracing whatever right of refund the claimant is entitled to assert under the Federal Constitution.
Second. With respect to floor stock taxes, no serious question is presented as to the adequacy of the remedy. The remedy by suit is expressly preserved. If the Commissioner refuses refund, suit may be brought against the United States in the Court of Claims or in the District Court for the recovery of the amount claimed to have been illegally exacted. Section 905.
amount of refund due any claimant with respect to such claim." The Commissioner is required to "make refund of any such amount determined by a decision of the Board which has become final." Section 906(b). The hearing, upon notice, before the Board is to be open to the public and is to be conducted by a presiding officer who is either a member of the Board or an officer or employee of the Treasury Department designated by the Secretary of the Treasury. The proceedings are to be in accordance with the rules of practice and procedure prescribed by the Board with the approval of the Secretary of the Treasury, save with respect to rules of evidence, which are to be in accordance with those applicable in courts of equity of the District of Columbia. The claimant and the Commissioner are entitled "to be represented by counsel, to have witnesses subpoenaed, and to examine and cross-examine witnesses." Provision is made to compel the attendance and testimony of witnesses and the production of books and papers from any place in the United States and to require the taking of depositions. Section 906(c)(d). The presiding officers are to recommend findings of fact and a decision to the Board or the proper division thereof within six months after the conclusion of the hearing. Briefs with respect to such recommendations may be submitted within a specified time. The Board or a division is to make its findings of fact and decision in writing as quickly as practicable. The findings and decision of a division are to become those of the Board within thirty days unless the chairman has directed that they be reviewed by the Board. Copies of the findings and decision are to be mailed to the claimant and the Commissioner. Section 906(e). There is a further provision as to costs and fees. Section 906(f). The decision of the Board is to become final in the same manner as decisions of the Board of Tax Appeals under § 1005 of the Revenue Act of 1926 as amended. Section 906(g); 26 U.S.C. 640.
"exclusive jurisdiction to affirm the decision of the Board, or to modify or reverse such decision, if it is not in accordance with law, with or without remanding the cause for a rehearing, as justice may require."
Section 906(g). If the claimant or the Commissioner applies to the Court of Appeals for leave to adduce additional evidence, the court may order it to be taken before the presiding officer if the court is satisfied that the additional evidence is material and that there were reasonable grounds for failure to adduce it at the hearing. The Board may modify its findings and decision by reason of such additional evidence, filing its modified or new determination with the court. The judgment of the Court of Appeals is to be final, subject to review by this Court upon certification or certiorari as provided in §§ 239 and 240 of the Judicial Code.
Fourth. The question then is whether, despite this broad right of judicial review of the action of the Board, the administrative scheme has such inherent constitutional defects that the petitioner should not be remitted to that procedure. The inquiry has particular relation to the provisions (1) as to burden of proof, § 902; (2) as to presumptions, § 907, and (3) as to certain matters of administrative detail.
shall be allowed unless the claimant establishes to the satisfaction of the Commissioner, or of the trial court, or of the Board of Review in cases under § 906, that the claimant bore the burden of the amount paid as tax and "has not been relieved thereof nor reimbursed therefor nor shifted such burden, directly or indirectly" (1) through the inclusion of the amount paid in the price of the product; (2) through reduction of the price paid for the raw material; "or (3) in any manner whatsoever."
According to the allegations of the complaint, the petitioner initially did bear the burden of the unconstitutional tax, as petitioner paid it. The question for administrative determination is whether the burden of that payment has been shifted. So far as petitioner's contention may be taken to be that it is entitled to recover by reason of the invalidity of the tax, although in fact its burden has been "passed on" to another, the contention cannot be sustained. While the taxpayer was undoubtedly hurt when he paid the tax, if he has obtained relief through the shifting of its burden, he is no longer in a position to claim an actual injury, and the refusal of a refund in such a case cannot be regarded as a denial of constitutional right.
"as substantively limiting the right to a refund of taxes of the designated class to instances where the taxpayer either has not directly or indirectly collected the tax from the purchaser or after so collecting it has returned it to him."
"there accrued to the taxpayer when he paid the tax a right to have it refunded without any showing as to whether he bore the burden of the tax or shifted it to the purchasers."
"that the taxpayer (a) must show that he alone has borne the burden of the tax, or (b), if he has shifted the burden to the purchasers, must give a bond promptly to use the refunded sum in reimbursing them."
"than to require that it be shown or made certain that the money, when refunded, will go to the one who has borne the burden of the illegal tax, and therefore is entitled, in justice and good conscience, to such relief."
"If the taxpayer has borne the burden of the tax, he readily can show it, and certainly there is nothing arbitrary in requiring that he make such a showing. If he has shifted the burden to the purchasers, they and not he have been the actual sufferers, and are the real parties in interest, and, in such a situation, there is nothing arbitrary in requiring, as a condition to refunding the tax to him, that he give a bond to use the refunded money in reimbursing them."
"aims at the abstract justice of the case, and looks solely to the inquiry whether the defendant holds money which, ex acquo et bono, belongs to the plaintiff."
Id., p. 291 U. S. 403.
The circumstance that, under title VII, here involved, there is no provision for making a refund to particular persons to whom the burden of the invalid exaction may be found to have been shifted presents no sound distinction so far as the claimant is concerned. The controlling principle is that there is no denial of constitutional right in requiring the claimant to show, where it can be shown, that he alone has borne the burden of the invalid tax, and has not shifted it to others.
latter class. In its amended complaint, petitioner sets forth at length the features of the operation of a cotton mill such as its own. By reason of the nature of these operations, petitioner asserts that there is "an inherent impossibility" of proving whether or to what extent the burden of the taxes paid has been shifted to others.
This allegation is, at best, but a statement of a legal conclusion which must depend upon the facts as they appear when proof is taken. The question is whether the petitioner is entitled to insist as a matter of constitutional right upon trying out the question of impossibility in this suit, rather than in an administrative proceeding where all the pertinent facts as to the course of business may be presented and the conclusions they require both of fact and law may be reached. This assertion of such a constitutional right rests upon a construction of § 902 to the effect that, if the facts, fully disclosed, afforded no basis for any determination as to the shifting of the burden of the tax, and hence gave no warrant for a finding that the burden had been shifted from the claimant to others, still the statute would require a denial of the right to a refund. The claimant would then stand, by virtue of the injury caused by the payment of the tax, not as one seeking relief when he had not been hurt, but as one who had been hurt by a payment unconstitutionally required and whose proved injury could not be said to have been redressed. It is in that aspect that the statute is assailed as leaving the claimant without remedy for a deprivation of his property without due process of law.
"even to come so near to doing so as to raise a serious question of constitutional law." Federal Trade Comm'n v. American Tobacco C, 264 U. S. 298, 264 U. S. 307; Panama R. Co. v. Johnson, 264 U. S. 375, 264 U. S. 390; Blodgett v. Holden, 275 U. S. 142, 275 U. S. 148. When the Congress requires the claimant, who has paid the invalid tax, to show that he has not been reimbursed or has not shifted its burden, the provision should not be construed as demanding the performance of a task, if ultimately found to be inherently impossible, as a condition of relief to which the claimant would otherwise be entitled. There is ample room for the play of the statute within the range of possible determinations. Impossibility of proof may not be assumed. It cannot be doubted that the requirement has appropriate and valid effect in placing upon the claimant the duty to present fully all the facts pertaining to the question of the shifting of the burden of the tax and in denying relief where the facts justify a conclusion that the burden has been shifted from the claimant to others. When the facts have been shown, it becomes the duty of the Board of Review to make its determination according to the legal rights of the claimant. That is the necessary import of the provision for judicial review, giving authority to the reviewing court to modify or reverse the decision of the Board "if it is not in accordance with law." Findings that can properly be made upon the evidence must thus support a decision according to legal right. And, as we have seen, the reviewing court, and finally this Court, may direct the Board "to enter any designated judgment" [Footnote 3] to which the claimant is constitutionally entitled and the Commissioner must refund the amount thus determined to be due.
whether, in its case, the shifting of the burden of the tax is or is not "susceptible of proof." Constitutional questions are not to be decided hypothetically. When particular facts control the decision, they must be shown. Borden's Farm Products Co. v. Baldwin, 293 U. S. 194, 293 U. S. 208-210. Petitioner's contention as to impossibility of proof is premature. Manifestly there is no impossibility so far as the production of proof of petitioner's operations or course of business is concerned. What is meant by impossibility of proof is impossibility of determination after these facts are in. Whether or not any such impossibility of determination will exist is a question which properly should await the ascertainment of the facts. For the present purpose, it is sufficient to hold, and we do hold, that the petitioner may constitutionally be required to present all the pertinent facts in the prescribed administrative proceeding, and may there raise, and ultimately may present for judicial review, any legal question which may arise as the facts are developed.
These considerations also dispose of the contention that § 902 "is so vague and uncertain that it is meaningless, and therefore affords no remedy." It was not necessary for the Congress, in insisting that a claimant should not recover where it appeared that he had not borne the burden of the tax, to attempt to formulate the conclusions which would be appropriate upon varying states of fact. Petitioner's argument, drawn from the writings of economists, is itself sufficient to show the futility of such an effort. The Congress could, and did, lay down a general principle and leave its application to the facts as they would appear in particular instances in a proceeding adapted to their full disclosure. The general principle thus laid down is no more vague and indefinite than the equitable doctrine which governs the right of recovery in actions for money had and received.
"shall be prima facie evidence that the burden of such amount was borne by the claimant to the extent (not to exceed the amount of the tax) that the average margin per unit of the commodity processed was lower during the tax period than the average margin was during the period before and after the tax;"
"If the average margin during the tax period was not lower, it shall be prima facie evidence that none of the burden of such amount was borne by the claimant. but that it was shifted to others."
"the twenty-four months (except that, in the case of tobacco, it shall be the twelve months) immediately preceding the effective date of the processing tax, and the six months, February to July, 1936, inclusive."
Provision is made for the computation of what is called the "average margin" for the respective periods, the "margin" being determined by deducting from the gross sales value of articles processed the cost of the commodity processed and the processing tax.
Petitioner contends that the presumptions are entirely arbitrary, and therefore unconstitutional. There is a general allegation to that effect in petitioner's amended complaint. But it cannot be said that the comparisons set up between the results of operations during the "tax period" and the "period before and after the tax" are wholly irrelevant. Nor can it now be determined what will be the effect of the presumptions. While petitioner assails them, its complaint contains no allegation as to their actual effect in relation to petitioner's operations.
Non constant but that they may work to petitioner's advantage. For all that we know, the presumption may establish prima facie that petitioner has borne the burden of the tax. Petitioner invites us to enter into a purely speculative inquiry for the purpose of condemning statutory provisions which have not been tried out and the effect of which cannot now be definitely perceived. We must decline that invitation and adhere to the fundamental principle which governs our determination of constitutional questions. Liverpool, New York & Philadelphia Steamship Co. v. Commissioners, 113 U. S. 33, 113 U. S. 39; Cincinnati v. Vester, 281 U. S. 439, 281 U. S. 448-449; Ashwander v. Tennessee Valley Authority, 297 U. S. 288, 297 U. S. 324.
we are of the opinion that the provision was intended to afford, and does afford, full opportunity to the claimant to present any evidence which may be pertinent to the questions to be determined by the Board of Review and which may be appropriate to overcome any presumption which might be indulged either under § 907(a) or otherwise.
Procedural due process in the conduct of the administrative hearing. Petitioner also complains that, under § 906(d), the hearing is to be conducted not by the Board of Review or a division thereof, but by a "presiding officer" designated by the Secretary of the Treasury, and that, under § 906(e), the presiding officer is to recommend to the Board or a division findings of fact and a decision. Petitioner urges that the Board or its division is not required by the statute to consider the evidence, and hence that the procedure contemplated by § 906 does not meet the requirements of due process. We find no merit in these contentions. There is no provision of the statute which is necessarily inconsistent with the observance of the due process required in hearings by administrative bodies. Interstate Commerce Comm'n v. Louisville & Nashville R. Co., 227 U. S. 88, 227 U. S. 91; United States v. Abilene & Southern Ry. Co., 265 U. S. 274, 265 U. S. 288; Morgan v. United States, 298 U. S. 468, 298 U. S. 480-481; Ohio Bell Telephone Co. v. Public Utilities Comm'n, 301 U. S. 292. "The provision for a hearing implies both the privilege of introducing evidence and the duty of deciding in accordance with it." Chicago Junction Case, 264 U. S. 258, 264 U. S. 265. Whatever the privilege or duty of the presiding officer, and whatever may be his recommendation, the statute requires that "the Board or a division shall make its findings of fact and decision in writing" and shall certify and file with the court on judicial review a transcript of the record upon which its findings and decision are based.
The court has jurisdiction "to affirm the decision of the Board, or to modify or reverse such decision." If additional evidence is taken, "the Board may modify its findings of fact and decision" by reason of such evidence. The whole scheme of the administrative proceeding presupposes hearing and determination in accordance with the demands of due process. The Board which makes its findings and renders its decision must consider the evidence and base its findings and decision upon it, and until the contrary appears, we must assume that the Board will do so. Morgan v. United States, supra.
We conclude that the authorized procedure provides for a full and fair hearing and determination of all matters of fact, and that, through judicial review, it provides for the protection of all the legal rights of the petitioner, including any constitutional right which it may be entitled to invoke with respect to the refund which it seeks. The petitioner may thus obtain through this proceeding whatever judgment its case warrants, a judgment which the government, by virtue of the requirement that the Commissioner shall make refund accordingly, binds itself to pay.
The judgment of dismissal is affirmed, but upon the grounds stated in this opinion.
MR. JUSTICE STONE and MR. JUSTICE CARDOZO concur in the opinion save that they reserve their vote as to the constitutional or statutory rights of the taxpayer in the event that it shall be impossible to ascertain whether there has been a shifting of the tax, an examination of those rights, in their judgment, being unnecessary now, since "impossibility of proof," in the language of the opinion, "may not be assumed."
"The established rule as to be proper scope of constitutional litigation can be applied in this case with no danger of injury to petitioner. If, upon an appropriate record and in the light of an actual attempt by the taxpayer to show the incidence of the processing tax, this Court should hold any part of Title VII invalid, the taxpayer may recover all of the taxes to which he is entitled under such a decision, with interest at 6 percent per annum (Sec. 908(a)); § 614(a) of the Revenue Act of 1928, c. 852, 45 Stat. 791. For, whether or not § 902 and § 907 be held invalid, the Board of Review would still remain as a mechanical means by which to enforce the decision of a circuit court of appeals or of this Court. Even if § 902 were held invalid, and recovery allowed on more proof of payment of Agricultural Adjustment Act taxes, the Board of Review would still have jurisdiction to review the allowance or disallowance of any claim, and the circuit courts of appeals and this Court would still have power to direct the Board to enter any designated judgment. And § 906(b) provides that 'the Commissioner shall make refund of any such amount determined by a decision of the Board which has become final.'"
"Sec. 902. Conditions on allowance of refunds."
"No refund shall be made or allowed, in pursuance of court decisions or otherwise, of any amount paid by or collected from any claimant as tax under the Agricultural Adjustment Act unless the claimant establishes to the satisfaction of the Commissioner in accordance with regulations prescribed by him, with the approval of the Secretary, or to the satisfaction of the trial court, or the Board of Review in cases provided for under Section 906, as the case may be --"
"(a) That he bore the burden of such amount and has not been relieved thereof nor reimbursed therefor nor shifted such burden, directly or indirectly, (1) through inclusion of such amount by the claimant, or by any person directly or indirectly under his control, or having control over him, or subject to the same common control, in the price of any article with respect to which a tax was imposed under the provisions of such Act, or in the price of any article processed from any commodity with respect to which a tax was imposed under such Act, or in any charge or fee for services or processing; (2) through reduction of the price paid for any such commodity; or (3) in any manner whatsoever, and that no understanding or agreement, written or oral, exists whereby he may be relieved of the burden of such amount, be reimbursed therefor, or may shift the burden thereof; or"
"(b) That he was repaid unconditionally such amount to his vendee (1) who bore the burden thereof, (2) who has not been relieved thereof nor reimbursed therefor, nor shifted such burden, directly or indirectly, and (3) who is not entitled to receive any reimbursement therefor from any other source, or to be relieved of such burden in any manner whatsoever."

References: § 905
 § 902
 § 907
 § 906
 v. 
 v. 
 v. 
 § 910
 § 1005
 § 902
 § 907
 § 906
 § 902
 v. 
 v. 
 v. 
 v. 
 § 902
 v. 
 v. 
 v. 
 § 907
 § 906
 § 906
 § 906
 v. 
 v. 
 v. 
 v. 
 v. 
 § 614
 § 902
 § 907
 § 902
 § 906