Court Opinion

ID: 6912037
Source: CourtListenerOpinion
Date Created: 2022-07-23 22:26:24.535732+00
Date Added: 2024-06-11T16:06:32.371732
License: Public Domain

JOHNSEN, Circuit Judge
(dissenting in part).
I think the case that is being affirmed should, equally with the others, be reversed.
The cases being reversed are ones where stamped,- marked bottles, originally containing whiskey of a certain brand and proof, had been made to have contents, in part, of other (cheaper brand) liquor. The case being affirmed is one where stamped, marked bottles, originally containing whiskey of a certain brand and proof, had been made to have contents of part of the original liquor and of added water. In the latter case, the spirit proof, to which the stamp upon the bottle had application, necessarily was as much subject to being changed by the water added as by the liquor added in the other cases.
It was admitted in the District Court, and is admitted • here, for purposes of consideration of the Regulation that is involved, that all of the defendants are tavern operators -and bartenders, who were making use of the bottles, with their changed-proof contents, to sell liquor by the drink to the general public.
The Regulation in question is 26 C.F. R. § 175.121, entitled “Reuse of containers”, and providing: “No liquor bottle or other authorized container shall be reused for the packaging of distilled spirits except as provided ’ in § 175.62 [the exceptions being concededly not here applicable], nor shall the original contents, or any portion of such original *189contents, remaining in a liquor bottle or other authorized container be increased by the addition of any substance.”
It will be noted that the Regulation contains two prongs, both of which appear to be commonly purposed, in relation to making use of a bottle for liquor-containing purposes — (1) that a liquor bottle may not at all, except as provided in § 175.62, be used for the packaging of any other liquor whatsoever, and (2) that it may no more be used to make an increase in the amount of the original liquor contents remaining in it at any time by the addition of any substance to it.
When it is borne in mind that what the Regulation is directed at is, as its title indicates, “Reuse of containers”, it would seem to me that the plain, practical effect of the Regulation simply is, where § 175.62 is without application, to prohibit the using of a liquor bottle as a container for any distilled spirits other than the original liquor, in whole or part, which came therein, and with the right to use the bottle as a container for such liquor continuing only so long as it is allowed to remain in its original state and form, by not having anything added thereto that increases the quantity of the bottle’s contents. On this basis, it is not possible for a liquor dealer, such as the parties here were, to effect any change in the proof-content of bottled liquor, so that all such liquor will in general be subject to ready identification as that to which the stamp upon the bottle is applicable, and as therefore not normally requiring any investigation of whether it is in fact tax-paid or tax-unpaid liquor.
As I have stated, all of the situations before us involve retail liquor sellers, a field that is of course one of general and not marginal revenue-enforcement concern, so that the Regulation properly may be dealt with here on the basis of that business and the question of revenue-enforcement therein. I should not think that any tavernkeeper or bartender could possibly misunderstand what the impact of the Regulation is upon the operation of his business. And I am sure that it is not possible for anyone to contend that this imposes an unwarranted burden or hardship upon that business. If then the Regulation, as its language reads, is reasonably capable of serving as a relevant and facilitative instrument in proper incidents of revenue enforcement against tavernkeepers and bartenders, there can be no occasion, nor do I believe that there exists any right, to undertake judicially to whittle down or curb the force and application of the Regulation in any way.
Is the Regulation capable of serving as a relevant and facilitative instrument in proper incidents of revenue enforcement in the tavern business ? Inspection or examination of bottles used in a public bar, especially if any suspicion may have been aroused, will naturally, it seems to me, be engaged in by revenue agents as an ordinary incident of enforcement precaution and revenue protection. The Regulation, as it stands, has the effect of making tavernkeepers warrant to the Treasury Department and its enforcement agents that they are not selling anything except tax-paid liquor, in that their bottles are required to contain only the liquor to which the stamps affixed thereto are applicable, and this entirely in its original state and form.
If the character of a tavernkeeper is such that a revenue agent deems it desirable to make a check as a matter of enforcement precaution, the Regulation, if unviolated, affords a basis, as I have suggested, for ready identification, as a matter of brand and spirit proof, that the contents of each bottle constitute the liquor to which the stamp thereon has application and that the bottle therefore does not contain tax-unpaid liquor. But if anything has been added to the contents of the bottle, so as to increase its fluid quantity and thereby change its spirit proof, the revenue agents necessarily will not have this ready means of ascertaining or assuring themselves that the bottle does not contain tax-unpaid liquor. This will be true whether the thing added is liquor or other fluid, *190such as water, since either is capable of changing the proof and so leaves the resulting liquor contents of the bottle not subject to the same measure of simple identification as to nature and source. In both situations, the revenue agents obviously face a more difficult task of satisfying themselves, in the revenue interest, that the contents of the bottle are not tax-unpaid liquor than where the liquor remains identifiable in proof and brand, from its unchanged status, as bearing relationship to the affixed stamp.
This seems to me sufficient to require that the Regulation be given effect, as it stands, as a facilitative instrument of revenue-agent investigation and enforcement. The majority opinion, however, holds that the Regulation should be construed as having been intended by the Secretary of the Treasury to mean and apply only to “any substance subject to taxation under the internal revenue laws of the United States”. In other words, what the majority in effect say is that the Secretary of the Treasury intended the Regulation, in its impact upon retail liquor dealers, to mean only that they were not at liberty to add other liquor to the bottles from which they were making sales by the drink to the public, but that they were perfectly free to increase the quantity of liquor in such "bottles and change its proof content in any way they might see fit, by adding water or any other fluid, even though this in the same manner would create difficulties for revenue agents in checking and identifying the contents of the bottle as tax-paid liquor.
The basis on which this intention and meaning are imputed to the Regulation is the holding of the Supreme Court in United States v. A. Graf Distilling Co., 1908, 208 U.S. 198, 28 S.Ct. 264, 52 L.Ed. 452, where the Government was seeking to subject to forfeiture three barrels of whiskey to which burnt sugar or caramel had been added for coloring purposes, after the barrels had been duly stamped by revenue officers. The forfeiture was sought under a statute which prohibited such a barrel from “containing anything else than the contents which were therein when said articles had been so lawfully stamped * * The Court, in concluding that Congress, by the particular statute, had not intended the words “anything else” to “ ‘include substances that are not in themselves taxable under the laws of the United States’ ”, said: “We are here called upon to determine what is the proper construction of the language of the statute when it speaks of selling a barrel and its contents after it has been properly stamped, and which, at the time of sale, contained anything else than the contents which were therein when the barrel was stamped by the revenue officer. * * * The language used, when considered in connection with the whole statute, is not so plain as to preclude the application of those general rules of construction of statutes which frequently interpret language in accordance with what seems to be the real meaning of the legislature, although not in exact and literal obedience to the wording of the law. * * * We cannot see * * * that any reasonable purpose could be attributed to Congress in prohibiting an addition, such as is charged in this case * * 208 U.S. at pages 205 and 206, 28 S.Ct. at pages 265 and 266.
But the fact that the Court took the view in 1908 that “the real meaning of the legislature” in enacting the particular statute involved had not been to prevent the putting of burnt pugar into a barrel of whiskey for coloring purposes, but simply to prohibit the adding of any taxable substance to a barrel after it had been stamped, can hardly blindly be said to be determinative that the Secretary of the Treasury in promulgating a regulation as to the use or reuse of opened liquor bottles, in the practical problems of present-day revenue investigation and enforcement, necessarily could have had only the same intent, despite the fact that the language used in the Regulation clearly indicates the contrary. Certainly, the Regulation is entitled to its own fair evaluation of ac*191tual intent, in relation to its own purpose as indicated by its provisions and circumstances.
Congress specifically gave the Secretary of the Treasury the following power, among others, for revenue-protection purposes: “Whenever in his judgment such action is necessary to protect the revenue, the Secretary is authorized, by the regulations prescribed by him * * *' (1) to regulate the size, branding, marking, sale, resale, possession, use cmd re-use of containers * * * designed or intended for use for the sale at retail of distilled spirits * * (Emphasis mine.) 26 U.S. C.A. § 2871.
If 26 C.F.R. § 175.121, promulgated on the basis of this power, was intended merely to prohibit the putting of other liquor into a bottle, then the language of the second prong of the Regulation, “nor shall the original contents, or any portion of such contents, remaining in a liquor bottle or other authorized container be increased by the addition of any substance”, is redundant and purposeless, for the prohibiting of putting other liquor into a bottle had already been clearly effected by the first prong of the Regulation that “No liquor bottle or other authorized container shall be reused for the packaging of distilled spirits except * * Putting any other liquor into a bottle for the purpose of selling it therefrom is obviously a reuse of the bottle “for the packaging of distilled spirits”.
Thus, the second prong of the Regulation necessarily is entitled to be regarded as having been intended to mean something more than putting other liquor into a bottle, if the Regulation is to be accorded the privilege of being read as a whole. To me, it seems clear that the “real meaning” and “reasonable purpose” of the Regulation (using the expressions of the Supreme Court) were, as I have said above, in its relation to liquor dealers engaged in making sales of drinks to the public, to prohibit the using of a liquor bottle as a container for any distilled spirits other than the original liquor, and to permit its use as to such liquor only so long as that liquor was permitted to remain in its original state and form, by not having anything added thereto increasing the amount of the bottle’s content.
The investigation and enforcement facilitation which this affords to revenue agents, in having bottles prevented from being used to hold liquor of changed strength and proof and so leaving the liquor readily identifiable with the stamp, enabling them to determine generally that tax-unpaid liquor is not being sold by a tavernkeeper, has already been commented upon and requires no further discussion.
I had hoped that this relevant, facilitative and needed instrument of investigation and enforcement would not judicially have been taken away from the revenue agents, by such an imputation of artificial and unnecessary intention and meaning to the Regulation, as I feel the Court has done.