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Timestamp: 2016-12-08 06:11:37
Document Index: 144790376

Matched Legal Cases: ['§ 611', '§ 613', '§ 613', '§ 613', '§ 613', '§ 613', '§ 613', '§ 613', '§ 1', '§ 613', '§ 613', '§ 302', '§ 613', '§ 613', '§ 1', '§ 613', '§ 1', '§ 302', '§ 1', '§ 613', '§ 613', '§ 613', '§ 613', '§ 1', '§ 613', '§ 613', '§ 613', '§ 613', '§ 613', '§ 613', '§ 613', '§ 613', '§ 613', '§ 613', '§ 613', '§ 613', '§ 613', '§ 613', '§ 613']

| Barton Mines Corp. v. Commissioner of Internal Revenue
Barton Mines Corp. v. Commissioner of Internal Revenue
BARTON MINES CORPORATION, APPELLANT AND CROSS-APPELLEE,v.COMMISSIONER OF INTERNAL REVENUE, APPELLEE AND CROSS-APPELLANT
Friendly, Chief Judge, Smith and Anderson, Circuit Judges.
Under the percentage depletion scheme a "reasonable allowance for depletion" is allowed as a deduction, in the case of mines, in computing taxable income, 26 U.S.C. § 611(a). The allowance is established in § 613(a) as a specified percentage of "the gross income from the property," at 15% for garnet, § 613(b) (6). The phrase "the gross income from the property" is defined as "the gross income from mining," § 613(c)(1), and "mining" is defined in § 613(c)(2):
"(2) Mining. -- The term 'mining' includes not merely the extraction of the ores or minerals from the ground but also the treatment processes considered as mining described in paragraph (4) (and the treatment processes necessary or incidental thereto) * * *."
"(4) Treatment processes considered as mining. -- The following treatment processes * * * shall be considered as mining * * *:
(D) in the case of lead, zinc, copper, gold, silver, uranium, or fluorspar ores, potash, and ores or minerals which are not customarily sold in the form of the crude mineral product -- crushing, grinding, and beneficiation by concentration (gravity, flotation, amalgamation, electrostatic, or magnetic), cyanidation, leaching, crystallization, precipitation (but not including electrolytic deposition, roasting, thermal or electric smelting, or refining), or by substantially equivalent processes or combination of processes used in the separation or extraction of the product or products from the ore or the mineral or minerals from other material from the mine or other natural deposit * * *."
"(5) Treatment processes not considered as mining. -- Unless such processes are otherwise provided for in paragraph (4) (or are necessary or incidental to processes so provided for), the following treatment processes shall not be considered as 'mining': electrolytic deposition, roasting, calcining, thermal or electric smelting, refining, polishing, fine pulverization, blending with other materials, treatment effecting a chemical change, thermal action, and molding or shaping."
Barton's grains were in competition with a number of other products such as corundum, natural and manufactured diamonds, synthetic aluminum oxide and synthetic silicon carbide -- all harder than garnet and, therefore, more effective abrasives. Consequently, it became essential that the grains reach a high level of purity to be competitive. As the result of Barton's various processes, it produced a highly pure product -- 90-92% pure in 1920, 94% pure in 1940, 95% pure in 1944 and 98% pure during the tax years in question. The large manufacturers of coated abrasives discovered that Barton's grading and purifying processes yielded higher purity grains than their own, and, gradually, the sales of 91% concentrate declined, until in 1958 they ceased altogether.
During the tax years in question, therefore, Barton's basic processes consisted of the heavy media tank, the flotation tank, the grain mill and the powder mill.*fn1 They operated essentially as follows. From the mine, the ore, which contained eight to ten per cent garnet by volume, was transported to Barton's mill where it was placed in a jaw crusher and reduced to a size which would pass through a 1" to 1 1/4" screen (material that did not pass through was subjected to continued crushing until it did). A magnetic separator then withdrew magnetite and "tramp iron," and the mixture dropped onto a second screen which separated out pieces in excess of approximately 1/8" to 1/4". The material (fines) that passed through the second screen was crushed in ball mill No. 1 and then processed through the flotation tank, and the particles which were too large to pass through the screen were processed through the heavy media tank which operated on the theory of gravity separation. The particles were suspended in a liquid, the specific gravity of which was lower than that of garnet, and the garnet sank to the bottom while the impurities floated off the top. In the flotation process, the smaller particles were placed in a tank containing water, and chemicals were added which adhered only to the garnet particles, causing them to be coated with air bubbles and to float to the top. The material emerging from the heavy media and flotation tanks was called "garnet concentrate" and contained 91% garnet by volume. It was, of course, wet and contained oils, grease and flotation chemicals which were introduced during the initial separation processes. The material, carried by a single feed, entered a dryer called dryer "H" where it was heated to an average temperature of 700 degree F. and sprayed with ferrous sulfate. The heat dried the concentrate and burned off the contaminants, introduced during the flotation and heavy media process, and the ferrous sulphate reacted with the heat to restore color uniformity to the concentrate, which had been streaked by the heavy media process. Ninety-nine per cent of the emerging concentrate (1% went directly to the powder mill) passed through a second magnetic separator where more magnetite was removed and then was processed through the grain mill, where further impurities were removed and the garnet was graded into 17 or 18 commercially usable sizes.
" Lighter non-garnet particles of a given size have less tendency to pass through the screens than similar size, but heavier, garnet particles. To efficiently implement the separation the particles being processed through the screens must be graded to very close size. Screens No. 6 consist of several different sized screens which separate each group grade into two feeds for two finished grades; the in-between sizes are rejected. Screens No. 7 grade the garnet grains to reasonably precise sizes."
The material that passed through the screens was subjected to magnetic separation to remove magnetite. Although a small amount (untreated finished grains) then went directly to the final set of screens, No. 8, most of the material went to a revolving cylinder called the capillarity unit, where the material was heated to a temperature of 1600 degrees to 1800 degrees F. The heat treatment restored color uniformity, healed fractures in the grains caused by the initial crushing, produced a tough skin and rounded some of the sharp edges of the garnet. These final screens were termed the scalper screens, and they effected the final removal of impurities (consisting primarily of mica), removed any oversized garnet grains, which went to the powder mill along with the impurities, and separated the remaining garnet grains into 17 ultimate sizes of 98% pure garnet, ready for packaging and shipping. The sizes were those set by the National Bureau of Standards to meet the requirements of the coated abrasives industry. Barton also set sizes according to individual customer specification.
The feed for the powder mill was comprised of the throw-offs from the grain mill which had resisted separation there, and had an average garnet content of 85%. The major constituent was the material rejected at the second set of screens Nos. 6 and 7 in the grain mill, but, additionally, it consisted of (1) the small amount of fines coming out of dryer "H", (2) surplus sizes that did not pass through the first set of screens No. 5 in the grain mill, and (3) various other small amounts from the grain mill process. The processes in the powder mill consisted basically of ball mill No. 2 (a rotating cylinder filled with steel blades), a cone dewaterer, "F", and a thickener and classifying separator. The feed passed through a magnetic separator, where magnetite was removed, into the ball mill which crushed the feed into desired sizes, scrubbed the garnet, restored uniformity of color and liberated some impurities. The powder then passed into the cone dewaterer, " F", where the larger particles sank to the bottom and the smaller ones floated. Because the later purification and sizing processes operated effectively only on the smaller particles, the large particles were recirculated back through ball Mill No. 2 for further crushing; and the small particles, which had floated off the top of the dewaterer, flowed past a magnetic separator into a large tank called a thickener. The tank was filled with moving water, and the garnet sank while the impurities floated off the top. The particles that settled in the thickener were pumped into a classifying separator. As described by the Tax Court, the classifying separator
"is a long tube-like device containing approximately 15 successively larger bins set one next to the other. The feed enters the smallest bin first, where a regulated flow of water causes the largest, heaviest particles to settle out at the bottom. The water from the first bin overflows into the next larger bin, where the velocity of the water is reduced somewhat from that in the first bin, with the result that the next smaller powder size settles to the bottom. This procedure is continued through all 15 bins, each containing a successively smaller powder size. At the final bin the impurities flow off the top and are discarded."
The disputed processes consist of dryer "H", the grain mill, the capillarity unit and the powder mill. The Tax Court held that dryer "H" was a mining process in its own right because it effected removal of water and was not specifically excluded from the category of mining -- being neither thermal action, roasting or a treatment effecting a chemical change -- and, even if it would be characterized as nonmining standing alone, it was necessary or incidental to the heavy media and flotation processes. The Tax Court held that gravity separation was only nominally involved in the grain mill's screening processes and that the screening was principally designed to grade and size the garnet in preparation for the sale of the finished product and was, therefore, nonmining. As exclusively gravity separation devices, the air tables and magnetic separators in the grain mill were held to be mining processes, but the capillarity unit was held to constitute thermal action or roasting. Except for the magnetic separators, all the processes in the powder mill were held to be nonmining in that they constituted "'refining' and/or 'fine pulverization.'" For the reasons hereinafter stated, we affirm the Tax Court's classification, as mining, of dryer "H", the air tables and the magnetic separators and its classification of the capillarity unit as nonmining, but we reverse its classification, as nonmining, of the powder mill and the remaining processes in the grain mill.
Each of the processes that removes impurities does so on a gravity separation theory and is, therefore, a form of beneficiation by concentration designated in § 613(c)(4)(D) as a mining process.*fn2 The only distinguishing feature among the separation processes is that some of them (the air tables and the magnetic separators) perform only the function of removing impurities, while the others not only remove impurities but also perform a sizing or grading function. Of the non-separation processes, some of them (screens No. 5, dryer "H", ball mill No. 2 and cone dewaterer, "F") perform functions preparatory to the removal of impurities, and the capillarity unit performs functions that are subsequent to the actual removal of impurities.
I. Whether it is permissible under the statute, § 613(c)(4)(D), to classify some processes as mining and others as nonmining when the only distinction between the various processes is that the former only perform the function of beneficiation by concentration while the latter perform sizing and grading functions as well?
The three sets of screens in the grain mill -- screens No. 5, Nos. 6 and 7, and No. 8 -- remove impurities. The Tax Court treated all three sets of screens together and, applying a "primary-purpose test," held them to be nonmining because they only nominally involved a method of gravity concentration in that the primary purpose of the screening was sizing and grading in preparation for sale. This opinion will treat, in this Part, the application of the Tax Court's test to screens Nos. 6, 7 and 8 and reserve for Part II a discussion of screens No. 5.
Screens Nos. 6 and 7 clearly accomplish beneficiation by concentration as they remove about 5% of the mineral impurities by gravity separation, which is specifically designated as a mining process in § 613(c)(4)(D). Screening or sizing, however, is not so designated. As the only authority for denying mining status to such a dual functioning process, the Tax Court cited Treas. Reg. § 1.613-3 (g)(2)(i), which was promulgated subsequent to the trial of the case. It provides in pertinent part:
"A process (even though otherwise nominally specified as a mining process in § 613(c) * * *) shall not be considered as mining if it functions in any significant degree as a necessary or incidental part of such nonmining processes as refining, smelting, roasting, manufacturing, or packaging, or any other non-mining activity. For example, the crushing and grinding or the loading for shipment of products which have been molded, shaped, or fired shall not be considered as mining."
The effect of the decision of the Tax Court is to erect a "solely-for-the-purpose-of-purification standard." Not only is such a standard wholly unrealistic -- sizing is an inherent part of most gravity separation processes -- but it was specifically rejected by the Congress in 1960 when it passed the Public Debt and Tax Rate Extension Act and amended § 613. The amendment, as offered by Senator Gore, contained the following provision:
"For purposes of this subparagraph, the term 'beneficiation by concentration' means the application of processes solely for the purpose of eliminating waste, or separating the mineral or ore from other minerals or ores * * *." § 302(b)(3)(c), 106 Cong. Rec. 13216-13217 (86th Cong. 2d Sess. 1960).
This provision was eliminated in the Conference Committee and in its place was substituted the language that is presently contained in § 613(c)(4)(D), with no reference to the "solely for the purpose of eliminating waste" test. The reason given for the deletion was that the amendment, as drafted, would have had "unintended effects in the way of upsetting long-established Treasury practices * * *." 106 Cong. Rec. 14546 (86th Cong. 2d Sess. 1960); see also U.S. Code Cong. Admin. News 2579-2583 (86th Cong. 2d Sess. 1960). The establishment of such a test by means of regulation or court decision would, therefore, directly conflict with the clear evidence of congressional intent and would be invalid.
A further argument against classifying screens Nos. 6 and 7 as mining processes was urged by the Commissioner before the Tax Court but has been dropped on appeal. The Commissioner claimed that the removal of relatively small amounts of impurities constituted "refining," which is specifically excluded from the list of mining processes, §§ 613 (c)(4)(D) and 613(c)(5). This same concept is embodied in Treas. Reg. § 1.613-3(f)(4), which was promulgated subsequent to the trial of this action. It provides in pertinent part:
Unfortunately, neither the statute nor the regulations defines the term "refining,"*fn3 and the Commissioner's suggestion that the removal of relatively small amounts of impurities constitutes "refining"*fn4 is inconsistent with the commonly understood meaning of that term in the mining industry, where it is defined as "any process in which impurities are removed from a metal or alloy * *." R. Rolfe, A Dictionary of Metallography, 214 (First American ed. 1955). Not being a metal or alloy, garnet is not encompassed by this definition.
Screens No. 8 also effect gravity separation, removing the final impurities (consisting principally of mica) from the grains, and what we have held with regard to screens Nos. 6 and 7 applies equally to screens No. 8. Although these screens size the grains into 17 or 18 commercially usable sizes, the fact that impurities are removed by these screens by gravity separation renders them a method of beneficiation by concentration specifically classified as mining under § 613(c)(4)(D). Because screens No. 8 follow the capillarity unit which we hold to be nonmining (infra p. 994), it is necessary to reach the Government's argument that any process applied subsequent to a nonmining process is per se nonmining regardless of the function it performs unless the application of the rule discriminates between similarly situated miners of the same mineral. See Treas. Reg. § 1.613-3(g)(2)(ii). The Tax Court rejected this argument as applied to the air tables and magnetic separators and the argument is equally without merit here. Such a provision was specifically deleted from the Gore Amendment before its final passage. Compare § 302 (b)(4)(B), 106 Cong. Rec. 13217 (86th Cong. 2d Sess. 1960) with Conf. Rep. 2005, U.S. Code Cong. Admin. News 2579 2583 (86th Cong. 2d Sess. 1960). Moreover, assuming that Treas. Reg. § 1.613-3 (g)(2)(ii) is a valid exercise of the Commissioner's authority, we think it should operate only to deny mining status to those processes which would otherwise be necessary or incidental to mining but for the intervention of a nonmining process. Those processes which are specifically designated mining under § 613(c)(4)(D), as is gravity separation, are not affected by the prior occurrence of a nonmining process.
The Tax Court held that the powder mill processes were nonmining because "they constitute 'refining' and/or 'fine pulverization.'" To be precise, whatever fine pulverization occurred did so in ball mill No. 2 where the feed was ground into extremely small sizes,*fn5 and the remaining processes were preparatory to the sizing and purification which occurred in the thickener and classifying separator.
Of the non-separation processes in the grain and powder mills, only one, dryer "H", was classified by the Tax Court as a mining process. None of these processes, standing alone, constitutes beneficiation by concentration or any other process specifically designated by § 613 (c)(4)(D) as a mining process. Their sole claim to "mining" status is that they are necessary or incidental to beneficiation by concentration; and that function would entitle them to mining status under the parenthetical contained in § 613 (c)(2).
The statute provides no definition of the terms "necessary or incidental," and the Tax Court provided no workable definition which drew a distinction between the two terms. In holding the dryer "H" was necessary or incidental to the prior flotation and heavy media processes, the Tax Court relied on what appears to be a causal connection test -- a process is necessary or incidental as long as the function performed by the disputed process is causally related to a mining process. More is required, and the two terms have distinctly separate applications. Because of the specificity with which § 613(c)(4)(D) outlines allowable mining processes, a process must be demonstrated to be essential or indispensable to the performance of the mining operation before it may be classified as "necessary." In the present case, therefore, it must be shown that the gravity separation could not occur except for the disputed process, which itself was an integral part of the operation. This accords with the common understanding of the term "necessary," The Random House Dictionary of the English Language 955 (Random House 1966), and no reason has been advanced why this should not apply in the context of mining depletion allowance. The common meaning of "incidental," on the other hand, implies that the process must occur in subordinate conjunction with a mining process, and that it is the coincidental and secondary result of the mining process. Id. at 720.
Treas. Reg. § 1.613-3(f)(2) (iii)*fn6 defines the terms "necessary or incidental," and its definition of "necessary" is in fundamental agreement with that outlined above. Its definition of "incidental," however, in addition to allowing for processes that are the coincidental result of mining processes, also includes any process related to a mining process so long as its cost is insubstantial in relation to the cost of the mining process. As the statute delegates to the Commissioner the power to define as a mining process "any other treatment process * * * not inconsistent with the * * * provisions of this paragraph," 26 U.S.C. § 613(c)(4)(H), our task is merely to determine if the disparity between the common definition of "incidental" and the Commissioner's is such that it is fundamentally inconsistent with the purpose of the statute. Clearly, it is not and the Commissioner's definition must be applied.
Applying these definitions to the disputed processes, it is at once apparent that screens No. 5 in the grain mill, although they remove no impurities, are necessary to the gravity separation function performed by the air tables. The grading of the concentrate into particles of equal size is essential to the effective functioning of the air tables, and screens No. 5 accomplish this purpose. The face that sizing is also a useful marketoriented function is not significant for the reasons given in the discussion of screens Nos. 6 and 7.
This leaves for consideration the following processes -- dryer "H", the capillarity unit, the ball mill, the cone dewaterer, "F", and the filters and dryers prior to screens No. 9 in the powder mill. Cone dewaterer, "F", separated out the larger particles emerging from ball mill No. 2 and recirculated them back for further crushing to facilitate the later gravity separation processes. The classifying separator operated effectively only on the smaller particles, and cone dewaterer "F", as it was essential to the performance of the gravity separation, was, therefore, necessary to the performance of a mining process within the meaning of § 613(c)(2). As to the filter and dryers "N" and "K" the Tax Court made no findings as to their being necessary or incidental to a mining process, and the record provides no basis for a finding on the issue. It seems likely, however, that these dryers were not indispensable to the further removal of impurities in screens No. 9; but it is also likely that they were designed to facilitate the subsequent gravity separation performed by screens No. 9, and were, therefore, incidental to a mining process. Under the circumstances we have no recourse other than to remand for a finding on the question of casual relation and for a determination whether the cost of the dryers and filter is insubstantial.
The Government argues that, properly classified, the remaining disputed processes are specifically excluded by the statute from being treated as mining processes. It argues that the ball mill is a fine pulverization process and that dryer "H" and the capillarity unit constitute roasting or thermal action. Since roasting and thermal action are specifically excluded from the class of mining processes by § 613(c)(4)(D) and § 613(c)(5) and fine pulverization by § 613(c)(5), the Government argues that they cannot be classified as mining processes even if otherwise necessary or incidental to mining processes. The argument is not persuasive for two reasons. First, application of the term "roasting" suffers from the same lack of statutory definition as did "refining," and the Government's suggested definition -- "the application of heat to effect a significant or desire change in the ore or mineral" -- overlooks the crucial point, recognized by the Tax Court, the "significant change" must be defined in terms of a chemical change in the mineral. P. Thrush et al., A Dictionary of Mining, Mineral, and Related Terms, at 931 (United States Government Printing Office, Bureau of Mines 1968). "Thermal action" has no statutory, regulatory or dictionary-of-mining definition, and, although the Government urges a definition which is equivalent, in effect, to any application of heat, the Tax Court apparently treated it as generically the same as roasting, and likewise requiring a chemical change. We agree.*fn7
Second, even if dryer "H" and the capillarity unit constitute roasting or thermal action, they are entitled to be classified as mining processes if they are necessary or incidental to gravity separation. Section 613(c)(2) makes it clear that any process necessary or incidental to processes classified as mining in § 613 (c)(4)(D) has mining status and the exclusion in § 613(c)(4)(D) of "roasting" and "refining" is subject to the "necessary or incidental" provision of § 613(c)(2). There is no reasonable distinction to be drawn between the exclusions contained in § 613(c)(4)(D) and those contained in § 613(c)(5), and the regulations make clear that even if a process constitutes fine pulverization, which is specifically excluded by § 613 (c)(5), it will be classified as a mining process if it is necessary or incidental to a mining process, note 6, supra.
The Tax Court held that dryer "H" was necessary or incidental to the flotation and heavy media processes, but it is quite clear under the definitions set forth above that dryer "H" was not essential or indispensable to any gravity separation process. Relative to the heavy media and flotation processes which took place prior to dryer "H", the drying, removal of grease, oil and flotation chemicals, and restoration of color uniformity were not essential to, nor did they aid, the removal of impurities. These functions, however, were related to the prior removal of impurities in that each was designed to act on the results of the prior processes. That relatedness is not enough, however, to qualify dryer "H" as incidental. Properly construed, the term "incidental" describes a process that takes place prior to a mining process and, although not essential or indispensable to the mining process, is designed to facilitate its performance. Processes that occur subsequent to mining processes and which remove grease, oil and other contaminants and restore uniformity of color are more properly viewed as designed to facilitate market acceptance and not the removal of impurities. Drying was also accomplished, however, and this was designed to facilitate the subsequent screening processes in the grain mill which accomplished gravity separation. That function was, therefore, related to concentration processes in the same way that the thawing of frozen ore is incidental to concentration in the example provided by the Regulation defining the term "incidental," note 6, supra. Dryer "H" was, therefore, incidental to the grain mill's concentration process, and if the cost was insubstantial relative to the other processes in the grain mill, it qualifies as a mining process under § 613 (c)(2).
The capillarity unit, however, was neither essential to nor designed to facilitate a mining process. It healed fractures on the surface of the garnet grains, produced a tough skin on the grains by the heat reacting with the ferrous sulphate, rounded some of the sharp edges and restored color uniformity; and Barton's brief alleges that it also cleaned the grains. All these functions looked solely toward the market and were neither essential to nor designed to facilitate the removal of impurities. As none of the functions performed by the capillarity unit is specifically designated as a mining process in § 613(c)(4)(D) it is unnecessary to determine whether the Tax Court was correct in holding that it constituted "roasting" or "thermal action." Since it was neither necessary nor incidental to a mining process, it is not entitled to be classified as a mining process.
The Government relies on one further argument in support of its position that dryer "H" and all the processes thereafter applied are nonmining processes. It contends that the legislative history of the 1960 Gore Amendment and the policies expressed by the Supreme Court in United States v. Cannelton Sewer Pipe Co., 364 U.S. 76, 80 S. Ct. 1581, 4 L. Ed. 2d 1581 (1960), demonstrate that as a general policy the depletion allowance should be based on the income of the raw mineral product if commercially marketable in that form. Because Barton marketed the 91% concentrate until 1958, the Government argues that garnet is commercially marketable at that point and no process applied thereafter should be classified as mining. We disagree.
"(2) Mining. -- The term "mining" includes not merely the extraction of the ores or minerals from the ground but also the ordinary treatment processes normally applied by mine owners or operators in order to obtain the commercially marketable mineral product or products * * *."
This provision had been construed to allow integrated miner-manufacturers to compute the depletion allowance based on the gross income from the sale of the manufactured product. See e. g., United States v. Cherokee Brick & Tile Co., 218 F.2d 424 (5 Cir. 1955) (selling price of burnt brick not raw clay); Dragon Cement Co. v. United States, 244 F.2d 513 (1 Cir.) cert. denied, 355 U.S. 833, 78 S. Ct. 50, 2 L. Ed. 2d 45 (1957) (selling price of finished portland cement not the raw cement rock). The bases for these extensions of the depletion allowance were the findings that the minerals could not profitably be sold in their crude state and that the first point at which the minerals could be commercially marketable at a profit was after they had been converted into the end products, brick and cement.
"Congress intended to grant miners a depletion allowance based on the constructive income from the raw mineral product, if marketable in that form, and not on the value of the finished articles." 364 U.S. at 86, 80 S. Ct. at 1586.
The Government's position is not persuasive. Even were we to assume that the "commercially marketable" test must operate as a gloss on the present statute, that test, as construed by Cannelton, would not operate to erect a mining cutoff point at the production of 91% concentrate. The record is quite clear that after 1958 Barton had no market for the 91% concentrate and that the lack of market was caused by the more efficient competitive abrasives. In addition, both the pre-Gore Amendment statute and the present statute distinguish between minerals that are normally marketed in crude form and those, like garnet, that are not. The former class of minerals is entitled to fewer allowable treatment processes than the latter, and the clear legislative policy is to allow depletion only on the treatment processes designed to bring the crude mineral product "to shipping grade and form." § 613(c)(4)(C). In Cannelton the Court specifically found that the clay and shale were customarily sold in the crude form, and it is with reference to such class of products that the Court recounted the legislative policy to grant depletion based solely thereon. D. Fernald, Gross Income From Mining: A Critique of Cannelton, 23 N.Y.I. Fed. Tax. 1379 (1965). No reported case has ever denied mining status to an extractive process designed to remove the valuable mineral from the worthless gangue;*fn8 and the Sixth Circuit has rejected an argument similar to that now urged by the Government in a case involving tax years prior to 1960, Dow Chemical Co. v. Commissioner of Internal Revenue, 433 F.2d 283 (6 Cir. 1970). Applying the pre-Gore Amendment statute as interpreted by Cannelton, therefore, the court held that in the absence of a showing of a market for natural brine, the extraction of the constituent minerals of brine should be considered mining processes under § 613(c)(4)(D), because brine was considered an ore not normally marketed in the crude form.
There is no indication, however, that Congress intended the Gore Amendment to incorporate the gloss on the statute added by Cannelton. The Cannelton decision was announced the same day, June 27, 1960, that the Conference Committee presented its report with the revised amendment to each House of Congress. There is no mention of the decision in the House of Representatives' debates on the amendment, and, although the Senate inserted the decision in the Congressional Record, 106 Cong. Rec. 14511-14513 (86th Cong. 2d Sess. 1960), there is no indication that the Senate adopted its rationale. The structure of the amendment makes it clear that Congress intended the Gore Amendment to be a specific designation of those processes that would be considered as mining. Congress intended that processes which either removed or aided in the removal of impurities would be classified as mining, and consistent with this purpose, it deleted a provision of the original draft which would have limited depletion to processes applied solely to remove impurities; and it expanded the original draft, which would have allowed processes necessary to mining, to include those necessary or incidental to mining. Conf. Rep. No. 2005, 2 U.S. Code. Cong. Admin. News 2557 (86th Cong. 2d Sess. 1960).