Before PARKINSON and KNOCH, Circuit Judges, and WHAM, District Judge.
Defendants were indicted in two counts. Count I charged conspiracy in violation of 18 U.S.C. § 371, to violate Secs. 2800(a)(1), 3072, 3111, 3115(a) and 3116 of the Internal Revenue Code of 1939, 26 U.S.C. §§ 2800(a)(1), 3072, 3111, 3115(a), 3116 and Title 26, Code of Federal Regulations (1949) Sec. 182.864 by obtaining and use of specially denatured alcohol in the manufacture and sale of two liquid medicines for internal use, and defrauding the United States of the tax due. Count II charged the corporate defendant and five of the individuals named in Count I with withdrawal and use of specially denatured alcohol in the manufacture of liquid medicines for internal use*fn1 without payment of the tax due.
On motion of the defendants, the District Court dismissed the indictment. The appeal is taken by the Government pursuant to the Criminal Appeals Act, as amended, 18 U.S.C. § 3731.
The motion to dismiss was based primarily on the ground that the fundamental criminal statute Section 3072, and the statute it implements, Sec. 3070(a), do not apply to the denatured alcohol defendants are charged with using and conspiring to use, and that Regulation 182.864 is invalid.*fn2
We need not discuss the other sections allegedly violated as these are dependent on a showing of violation of Sec. 3072 or Regulation 182.864.
In dismissing the indictment, the District Judge referred to a similar case which had been settled on a civil basis. The government lists, as a contested issue in this case, the question whether the action of the District Court in dismissing an indictment, against defendants not involved in the instant case, was a sufficient ground for dismissal of this indictment. The District Judge said that this was a criminal action to collect civil damages. As we agree with the District Court that the indictment fails to charge a crime, we do not reach that question.
There is no element here of misuse of dangerous or poisonous ingredients, but merely of alleged evasion of tax.
Alcohol when produced is "unadulterated". Denatured alcohol may be rendered poisonous and thus be "completely denatured", or merely distasteful and nauseating, and thus be "specially denatured". We are here concerned only with specially denatured alcohol.
Section 3072, as indicated, provides penal sanctions in connection with Sec. 3070(a) of the Code.A violation of Sec. 3072 must involve alcohol denatured under Sec. 3070(a).
It is axiomatic that criminal statutes must be strictly construed. United States v. Wiltberger, 1820, 5 Wheat. 76, 18 U.S. 76, 95-96, 5 L. Ed. 37.
A brief historical review of the legislation before us may be helpful.
As early as 1868, laws were designed to protect the tax on distilled spirits, which becomes due immediately the spirits come into existence. These laws, controlling the production, storage, and withdrawal of distilled spirits, developed words of art. The Act of 1868 (15 Stat. 125) permitted production of alcohol only in "registered" distilleries which had to be identified by a displayed sign (15 Stat. 132).
Prior to 1906 we also had "fruit" distilleries which were limited to distilling from specified fruits, unlike the "registered" distilleries which could distill from grain, starch, molasses, sugar, etc., and which were authorized to produce spirits of any kind and proof, ...