The opinion of the court was delivered by: LEVET
Opinion, Findings of Fact and Conclusions of Law.
This is an action for refund of excise taxes in the sum of $5,699.47, plus interest, under 28 USC § 1346(a)(1). The periods covered were the third and fourth quarters of 1958 and the four quarters of 1959.
The plaintiff is engaged in the importation and sale of housewares and giftwares manufactured in Japan. During the periods in question plaintiff imported and sold certain germanium diode radio receiving sets (Exs. 1-4) manufactured in and imported from Japan. These sets were of three styles: a wrist radio, a rocket radio and a pocket radio.
The questions presented in this case are as follows:
(1) Were the germanium diode radio receiving sets imported and sold by plaintiff during the third and fourth quarters of 1958 radio receiving sets of the entertainment type within the meaning of Section 4141 of the 1954 Internal Revenue Code, as amended?
(2) Were the germanium radio receiving sets sold by the plaintiff in the four quarters of 1959 taxable as radio receiving sets within the meaning of Section 4141 of the 1954 Internal Revenue Code?
(3) Is the United States equitably estopped from retroactively invoking Revenue Ruling 58-333?
The case was tried to the court without a jury. After hearing the testimony of the parties, examining the exhibits, pleadings, briefs and the proposed findings of fact and conclusions of law submitted by counsel, this court makes the following Findings of Fact and Conclusions of Law, separately numbered:
1. Plaintiff is and at all times hereinafter mentioned was a corporation organized under the laws of the State of New York engaged in the importation and sale of housewares and giftwares manufactured in Japan. (3-4; Complaint, par. 2)
2. During the third and fourth quarters of 1958 and the four quarters of 1959 plaintiff imported from Japan and sold certain devices which the defendant alleges are radio receiving sets and which have been described as crystal or germanium diode radio receiving sets. (9, 10)
3. These instruments, hereinafter described as germanium diode radios, were in three styles: a wrist radio, a rocket radio and a pocket radio. (Exs. 1-4)
4. The plaintiff did not include the excise tax on these devices in the price of the radio and did not collect the amount of the tax from the persons who purchased such radios. (32)
5. The following manufacturer's excise taxes were assessed on these articles for the following periods:
Third Quarter 1958 $ 727.74
Fourth Quarter 1958 2,354.52
First Quarter 1959 872.35
Second Quarter 1959 768.90
Third Quarter 1959 38.58
Fourth Quarter 1959 111.79
(Complaint, para. 6; 2-3)
6. Plaintiff paid the assessments on or about February 16, 1962, together with interest in the sum of $825.59, under protest. (Complaint, paras. 6-7; 2-3)
7. On May 18, 1962, plaintiff filed in the office of the District Director of Internal Revenue a timely claim for refund of each of the manufacturer's excise taxes paid on each of the aforesaid assessments, together with the interest thereon. (Complaint, para. 10; 2-3)
8. The claims of plaintiff were disallowed by the defendant and thereafter this suit was instituted. (Complaint, para. 12, admitted by Answer)
9. During the applicable period, the president of the plaintiff was David Breslow who was also in charge of selling. (4, 13, 14)
10. Mr. Breslow made several sales trips in 1958 and 1959. (15, 16) In order to make sales Mr. Breslow had to demonstrate that the germanium radios worked. (20-23, 37)
11. To aid in the sale of the germanium diode radios and to serve as an advertisement, plaintiff placed a display card into each box of a dozen rocket radios, which said "Rocket A-1, Tiny Germanium Radio" and displayed a boy riding a rocket. (26; Ex. 5)
12. There was enclosed with each germanium diode radio sold by the plaintiff an instruction leaflet. (46-47; Exs. A, B)
13. The instruction leaflet for the pocket radio (Ex. A) stated:
"POCKET RADIO INSTRUCTIONS
SIMPLE TO OPERATE: JUST CLIP YOUR ANTENNA TO METAL AND TUNE IN YOUR STATION.
ABSOLUTELY SAFE: BECAUSE 'POCKET' RADIO IS IN NO WAY CONNECTED TO ANY SOURCE OF POWER ELECTRICITY, IT IS COMPLETELY SAFE FOR ALL TO USE.
THE ELECTRONIC EXPLANATION OF HOW YOUR POCKET RADIO WORKS:
Actually, it is the radio broadcasting stations that supply the operating power for your 'Pocket' Radio. The frequency waves broadcasted by the stations, flow through the air, and are 'induced' into the metal structures and wires in or near your home. Then the Germanium Diode and internal Ferrite Loop, rectifies and tunes this signal energy. This rectified energy is amplified by your earpiece permitting your listening pleasure.
* Wonderful for everyone who wants a private, personal, compact radio! Grown-ups, teenagers, children . . . ...