Court Opinion

ID: 9703425
Source: CourtListenerOpinion
Date Created: 2023-08-25 23:55:31.406374+00
Date Added: 2024-06-11T18:21:48.561092
License: Public Domain

FRIEDMAN, Judge, dissenting.
Admittedly, this is a close case; however, after careful consideration of the relevant case law and its application to the *181facts presented here, I feel that Metaltech is entitled to the statutory protection from tax found in section 2(4) of the Act, 53 P.S. § 6902(4), because it is engaged in manufacturing. Therefore, I respectfully dissent.
In Bindex Corp. v. City of Pittsburgh, 504 Pa. 584, 475 A.2d 1320 (1984), our Supreme Court considered the term “manufacture” and determined that the concept underlying the definition of manufacture is the transformation of material or things into something different from that received. Rather than a superficial or cosmetic change which makes no real alteration in the goods, manufacture must result in a new identity for the basic materials, which is achieved through a combination of skill and labor that is easily traceable to the current producer.
The Treasurer contends that Metaltech’s dual process of galvanizing and annealing raw steel does not meet this definition of manufacture because it begins and ends with the same rolls of steel produced by the original manufacturer without creating a new and different product. Whereas the majority agrees with this characterization, I do not. Nor do I believe that merely because the steel is in rolls both before and after undergoing Metaltech’s process, that it is necessarily unchanged.
The Treasurer relied on City of Pittsburgh v. Hanlon-Gregory Galvanizing Co., (No. 3132 July Term 1974, filed February 15, 1977) to uphold the tax assessment against Metaltech. Hanlon-Gregory held that galvanizing steel did not constitute manufacturing because it did not result in the production of a new and different article where there had been no alteration in the form, quality or adaptability of the steel. The court specifically noted that the use for the steel had not changed in any way. Metaltech concedes that in the hot-dip galvanizing operation used by Hanlon-Gregory, the steel merely becomes corrosion resistant and does not acquire new properties. However, Metaltech argues that Hanlon-Gregory does not control here because Metaltech does not merely galvanize steel but also anneals it, a process which transforms the steel into a new product with the ability to be formed and *182stamped, totally unlike the full-hard cold-rolled steel from which it was derived.
The trial court rested its determination on City of Pittsburgh v. Electric Welding Co., 394 Pa. 60, 145 A.2d 528 (1958), in which the Court concluded that Electric Welding’s reshaping of steel rods into reinforcement products did not constitute manufacturing because the final product was the same as the original material except for slight changes in shape, length and some minor assembly. Here, however, Metaltech’s annealing process results in an end product which is clearly distinguishable from the raw material with which it began. Whereas brittle unannealed steel is useless for the vast majority of commercial applications (R.R. at 101a), the malleable steel manufactured by Metaltech is useful for a wide range of commercial products.
In School District of Philadelphia v. American Leonic Manufacturing Co., 205 Pa.Superior Ct. 243, 209 A.2d 5 (1965), cited by the majority here, the court determined that a company which produced “specialty wire” was not engaged in manufacture. The company purchased heavy wire which conformed to customer specifications and then converted it to thinner wire by drawing it through dies. Although the thinner wire was ultimately used in a variety of products, the court reasoned that the principal change made by the company was in the 'size of the wire, so that it had not gone through a substantial transformation in form, qualities and adaptability of use.
American Leonic is distinguished from this case because, unlike the wire in American Leonic which was altered only in dimension, the steel here undergoes a thorough transformation. The annealing process alters the metallurgical and chemical properties of the original raw material, converting it to finished steel with new qualities and uses.
The majority relies principally on Stewart Honeybee Products, Inc. v. Commonwealth, 525 Pa. 222, 579 A.2d 872 (1990) to support its determination. In Stewart Honeybee, our Supreme Court held that a taxpayer which processed raw honey and converted it into pasteurized liquid honey was not in*183volved in manufacture because the processed honey retained its use as a sweetener after it was treated.
The Court in Stewart Honeybee drew a distinction between that case and its opinion in Ski Roundtop v. Commonwealth, 520 Pa. 227, 553 A.2d 928 (1989), noting that in the latter case, the raw materials were substantially changed into a new material with properties and uses which it did not have prior to treatment.1 By comparison, the qualities of the steel here, by virtue of undergoing the annealing process, were significantly transformed, and the reformulated steel which resulted was now made available for uses that would have been impossible in its original form.
Finally, I note that by precluding taxation on manufacturers, section 2(4) of the Act, 53 P.S. § 6902(4), seeks to encourage the development of industry in the Commonwealth and to make products manufactured in Pennsylvania more competitive in the open market. Therefore, I believe that where the question is close, such as in the present case, any doubts should be resolved in favor of the taxpayer. Harsco Corp. v. City of Pittsburgh, 516 Pa. 562, 533 A.2d 1012 (1987).
I believe that the rolls of steel with which Metaltech began are not the same rolls of steel with which it ended. Rather, the finished steel which emerged from Metaltech’s “manufacturing” process was a new and different product from the original full-hard cold-rolled steel, having undergone both a physical and a functional change. Accordingly, I would reverse.

. In Ski Roundtop, the Court determined that the process of combining water and pressurized air to produce man-made snow constituted manufacture, stating that ''[t]he conclusion seems inescapable that man-made snow is substantially changed from its original materials in such a way that the resulting material is suitable for a new and different use from the materials from which it was made.” Id. at 233, 553 A.2d at 931. (Emphasis added.)