Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division; Charles Edgar Woodward, Judge.
Before EVANS, SPARKS, and KERNER, Circuit Judges.
The Government appeals from an adverse summary judgment in a suit brought agaist it to recover a sum of money paid as floor stocks taxes under the Agricultural Adjustment Act, c. 25, 48 Stat. 31, 7 U.S.C.A. § 601 et seq., before the taxing provisions of that statute were held unconstitutional in United States v. Butler, 297 U.S. 1, 56 S. Ct. 312, 80 L. Ed. 477, 102 A.L.R. 914. The quiddity of this appeal is whether § 902 of the applicable refund statute*fn1 requires the taxpayer to prove that he has not shifted the burden, in the economic rather than the legal sense, of the illegally collected tax.
Pursuant to Title VII of the Revenue Act of 1936, §§ 901-917, 49 Stat. 1747, 7 U.S.C.A. §§ 623, 644 et seq., the Cudahy Packing Company filed its complaint for the refund of $308,128.08 representing principally the floor stock taxes upon pork. After setting forth the facts essential to the District Court's jurisdiction, the complaint alleged that the plaintiff had not shifted the burden of the tax by billing any amount of floor stocks taxes to any vendee as a separate item, by adding to or including in the prices of its products any identifiable amount of floor stocks tases, nor by reducing the price paid for any commodity. Upon these allegations the plaintiff averred that it had not shifted directly or indirectly the burden of the tax and that if § 902 of the Revenue Act of 1936 required proof other than this, it violated the Fifth Amendment and was unconstitutional.
After the Government's answer had put in issue the averments with respect to the burden of the tax, the plaintiff presented affidavits of its officers which reaffirmed the allegations of the complaint and thereupon plaintiff moved for summary judgment under Rule 56 of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, to which the Government filed the affidavit of Murray T. Morgan, a marketing specialist of the Department of Agriculture. The District Court sustained the motion, made findings of fact and conclusions of law and entered judgment in favor of the plaintiff for $283,586.43.*fn2 The court was of the opinion that the taxpayer was not required to prove that the had borne the economic burden of the tax. 37 F.Supp. 563.
Section 902 prescribes the "Conditions on allowance of refunds." In substance it provides that no refund shall be allowed unless the claimant establishes that he bore the burden of the amount paid as tax and has not been relieved thereof nor reimbursed therefor nor shifted such burden, directly or indirectly (1) through the inclusion of the amount in the price of the product, (2) through the deduction of the price paid for the raw materials, or (3) in any manner whatsoever.
The Government and the plaintiff initially disagree as to the burden of proof which this section requires of the plaintiff.
Prior to the passage of Title VII,a claimant, to recover the illegally collected tax, merely had to show that it had been imposed upon him and that he ahd paid it. It is clear that under either the plaintiff's or the Government's interpretation of § 902, the provision is a limitation upon the taxpayer's right to a refund. The immediate end or object of this section is to prevent the unjust enrichment of the claimant, cf. Anniston Mfg. Co. v. Davis, 301 U.S. 337, 57 S. Ct. 816, 81 L. Ed. 1143, and that fact is to be considered in determining the right to recover the illegally collected tax. However, the difference between the plaintiff's and the Government's interpretation of the section is of moment because the reach of the economic burden test embraces more situaions of enrichment than the test in the legal sense.
Anniston Mfg. Co. v. Davis, supra, upheld § 902 as not a denial of due process in so far as it limited the taxpayer's refund remedy by imposing its conditions of recovery. Although it is true that the Court did not directly pass upon the competing interpretations now before us, the fact that much of the Court's opinion was devoted to the discussion of whether it was possible to prove the shifting of the burden makes it seem clear that the burden referred to was the economic burden, for otherwise the question of impossibility of proof could not have arisen.
If the Congressional intention were to cover only the situations included by the plaintiff's interpretation, the language of the section is needlessly broad. Admittedly, the shifting of the burden in the legal sense is include in § 902, but it does not follow therefrom that the burden, in its broader compass of the economic sense, was thereby to be eliminated. In fact, the full sweep of the language of § 902(a)(3) precludes any such limitation of Title VII's scope. If that were not so, § 902(a)(3) would serve no purpose. Although the phrase "economic burden" is not used in the section, any other interpretation of the word burden would do violence to the language and purpose of the section. This conclusion is also sustained by Senate Report No. 2156 of the Committee on Finance, pp. 32-34, 74th Cong. 2nd Sess.
There is no doubt that the shifting of the burden in the economic sense requires more exhaustive and difficult proof than the legal test. The measure is not confined merely to acts of the taxpayer; it rests in the economic forces at play, forces over which the average individual has little, if any, control. One force, to be sure, may be the tax,*fn3 but that makes no less real the other economic forces contributing to the resultant.*fn4 The proof of these components is the claimant's.
We shall not discuss plaintiff's contention that the economic burden test is unconstitutional, since we may not assume impossibility of proof. The judgment of the District Court will be reversed, and the cause will be remanded to that ...