The opinion of the court was delivered by: ABRUZZO
This action was instituted by the plaintiff against the defendants to recover manufacturer's excise tax which was paid by the plaintiff pursuant to Section 609 of the Revenue Act of 1932, 26 U.S.C.A. following section 1481. The amounts claimed are $11,643.88 and $8,141.72, respectively.
In order not to confuse the issue, upon the trial, all items other than the American News Company were withdrawn from the consideration of the Court and the complaint was amended so that it is claiming the right to recover the amount of $17,698.48 with interest. That this tax as alleged in the complaint has been paid is admitted by the defendants. It is also admitted by the defendants that the tax has not been refunded to the plaintiff although duly demanded.
The tax was imposed on the ground that jigsaw puzzles were games within the meaning of Section 609 of the Revenue Act of 1932. The defendants now admit that jigsaw puzzles as manufactured by the plaintiff are not games. This admission was undoubtedly brought about by the decision in the case of White v. Aronson, 302 U.S. 16, 58 S. Ct. 95, 82 L. Ed. 20, decided November 8, 1937, which held that jigsaw puzzles are not games and are not taxable under Section 609 of the Revenue Act of 1932.
A chronological survey of the plaintiff's claim develops the fact that on January 15, 1935 the plaintiff filed its refund claim which was rejected by the Commissioner on August 13, 1935. On February 4, 1937, the plaintiff filed another claim for this same tax which was rejected by the Commissioner on August 4, 1937. This action was commenced on January 10, 1939.
It is quite evident that under the statute no overpayment may be refunded unless the person who paid the tax has not included this tax in the price of the article or has collected the amount of tax from the vendee.
The jigsaw puzzles, forming the basis of this action, were sold by the plaintiff to the American News Company, pursuant to the terms of a contract made November 30, 1932 (plaintiff's exhibit 1). The testimony, which was uncontradicted, showed that the negotiations for this agreement were commenced in September 1932 and final arrangements as to price were arrived at in October 1932. These negotiations led to the signing of the agreement of November 30, 1932.
The plaintiff contends that it first learned that the government claimed the tax in February 1933. After the plaintiff was apprised of the fact that the government claimed a tax on the jigsaw puzzles, it did not increase the price of the puzzles because of the terms of the contract of November 30, 1932. It is clear that the tax was not passed on to the vendee.
On August 29, 1939, counsel for the plaintiff and defendants appeared before the Court and during the course of the argument the following observations were made (Rec. p. 2):
"The Court: The plaintiff has shown a prima facie case, that they did not pass the tax to the public, and the Court will make a finding that the tax was not passed on to the public. You have no quarrel with that.
"Defendants' Counsel: I will not concede that but that is the situation."
The record may be explored and it will be found that the defendants produced not one scintilla of evidence to refute this prima facie case. It follows therefore that the plaintiff is entitled to a finding in its favor on that phase of the case.
The defendants claim that even if that be so the plaintiff cannot recover because it did not bring this suit within two years after the date of the rejection of the first claim for refund, to wit, August 13, 1935, this action having been instituted on January 10, 1939.
After the rejection by the Commissioner of the first claim on August 13, 1935, the plaintiff did nothing until February 4, 1937, when it filed a second demand for the refund of this tax. It will thus be noted that this second claim for refund was filed before the expiration of the two year period allowed by the statute from the date of the first rejection. At the time of the filing of the second demand, the plaintiff ...