Court Opinion

ID: 7220746
Source: CourtListenerOpinion
Date Created: 2022-07-25 03:48:26.698485+00
Date Added: 2024-06-11T16:17:13.761487
License: Public Domain

*419On Rehearing.
These cases are again before the court, now upon plaintiffs’ motions for rehearing. By my memorandum of September 26th, I ruled that R. S. § 3224 (26 USCA § 1543) was inapplicable, but that section 21 (a) of the Amendment to the AAA of August 24, 1935 (7 USCA § 623 (a), operated to deprive the court of jurisdiction. Section 21 (a) was not discussed in the original argument, since at that time the government’s reliance was on R. S. § 3224. Under these circumstances, clearly the plaintiffs are entitled to rehearing upon the narrow question as to whether section 21 (a) precludes equitable relief with respect to processing taxes imposed before August 24, 1935.
Section 21 (a), or so much thereof as is applicable for present purposes, is as follows: “Sec. 21. (a) No suit, action, or proceeding (including probate, administration, receivership, and bankruptcy proceedings) shall be brought or maintained in any court if such suit, action, or proceeding is for the purpose or has the effect (1) of preventing or restraining the assessment or collection of any tax imposed or the amount of any penalty or interest accrued under this title on or after the date of the adoption of this amendment.” The limiting phrase therein contained, “on or after the adoption of this amendment,” must be construed as modifying the “tax imposed.” For the legislative history of the section shows that it was never intended to have application to processing taxes imposed prior to the date of the amendment. H. R. 8492, 74th Cong., 1st Sess.; House Report No. 1241, p. 20; Senate Report, No. 1011, p. 23.
And if the amendment is subjected to the process of internal construction, the same conclusion is indicated. For section 21 (d), 7 USCA § 623 (d), which imposes limitations upon the recovery at law of taxes illegally exacted, is by express terms made applicable to taxes “•which accrued before, on, or after the date of the adoption of this amendment.” When this language is contrasted with that of section 21 (a), it is apparent that by the latter paragraph Congress had no intention to curtail the equitable jurisdiction of the courts with respect to taxes imposed before the amendment.
The amended complaints show that the plaintiffs seek relief with respect to taxes “imposed” before as well as after the effective date of the amendment. The act, in section 9 (a), as amended (7 USCA § 609 (a), provides: “The processing tax' shall be levied, assessed, and collected upon the first domestic processing.” This language has been construed by regulations 81, article 7, to mean that “The tax is imposed upon the first domestic processing.” And article 8 of regulations 81 prescribes that “liability for the tax attaches to the processor upon "the first domestic processing.” And the Internal Revenue Department has ruled that the tax attaches upon the first domestic processing, even though the commodity subsequently be destroyed. Tax Ruling XIV-37-7692, P. T. 32, Int. Rev. Bulletin XIV-37, p. 13 (September 16, 1935). Tax Ruling, XIII-23-6837, P. T. 10; XIII-1 C. B. 452. And so, notwithstanding the fact that the taxes are not payable until ninety days after the filing of the return, regulations 81, article 12 (as amended by T. B. 4568, July 18, 1935), it must be held that within the meaning of section 21 (a) the taxes are “imposed” upon the first domestic processing.
It follows that the orders entered herein on September 26, 1935, dismissing the bills for lack of jurisdiction, must be vacated, and the petitions for- preliminary injunctions in so far as applicable to taxes imposed before August 24, 1935, must be granted, but in other respects denied.