Petition for Writ of Certiorari — General Motors Corp. v. United States

7 .

2s 766-315

i re

$ f 4 fa t

. ® * ha a om

” .

cal

a.

at

o e . .

catalina rtasen meagan ne

Ch ¢. ¥ 7 ~~

eae **

: a hs ’

, e ‘ r’ eo 5

. 0 + 74

° et ee ee :

7 - .

24

| > »

* ¥”. °

Siuprente Cit ots the Aluiten FS iLales

> -

°

Zt ‘ w24

3 pee

w .

,

; a) 4

{

i

‘

f

ae

rE ~ |

>

Vind

!

ee

=

} 1 |

\ a oe % ;

'

fo; 4 4

i >

rem

Cc o ‘

.

ky

e r :

) ; INDEX

Page

Opinions Below . ene San 1

Jurisdiction 0.0... : 5

~ Questions Presented 4

‘Statutes dnvolved |. . 2

Statement ....... soe wesg he 4

feasons for Granting the Writ =? nipie 7

| err eee Tr . er 16

ee rr, Sere Pore ree eerie Ss

Opinions. of the Court of Claims |. ...... . “Khak ee ee

Judgment of the =< of Claims i see wtih daea eee

Findings of Fact ....42...0..... adveedéecdiaiuvtaca ce

CITATIONS

Cases: ’ i _

Dalehite v. United States, 346 VS.15 2.000000 .000005. aos

Dickenson v. Petroleum Conversion Corp., 388 U.S. 507 @ ees

_ Ford Motor Company v. United States, 156 F. Supp. Sot

fk rr err rr as re eer reer |

General Motors Corperetivn. Frigidaire Dirisian vy. United

States, 121 F. Supp. 932 (C. Cls.), cert. denied $48 U.S. y

OE Pre ee CLI Sr ny Pre Te ere rrr reer 5, 1¥

General Motors Corporation, Prigidetie Division v. United

States, 146 F. Supp. 220 (C. Cis.) ...........-. Serer Ҥ

General Motors Corporation, Frigidaire Divisién v. United

Ben, Dae © CO. Wee 0G. GARD, nc cc cndcdscusecazs 6

John Hancock Mutual Life Insurance Company v. Bartels,

ee Wt, EE ha b% CES ACRE SOAR MRES ARLE ERA WRAR ES COR WKS . 15

Maggio v. Zeitz, 333 US. 56 26... eee cee eee Prerere 15

Statutes: ees

Internal Revenue Code of 1939:

I SD -cacchshedckkeavenscussaanr hc oh aT wre < e

IE, SEE 56 Gb 450s cS crdnemacabsbaseendececasauas 3

NE EP boc 4 6s ohn te shi bebie ns kA STARR EOE OR Rae ban 3,8

Section 3443 ......... Sul hasdsavegneeuneagecesaeuuee 3,8

Williston, Sales (1948 ME ee ee Eee, PEP TT 122.

Miscellaneous:

Unilurm Sales Act: Seetion 15(2) 22... ..60. 0060.00 ae cs TQ

IN THE

- Bupreme Court of the Mnited State

OctonER TERM, — | ¢

No.

GENERAL Motors Corporatio’, FRIGIDAIRE Division,

Petitioner, :

o.

e . x Vv.

THe Uniren- States, Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE COURT OF

: CLAIMS

-

*

Petitioner prays. that a. W rit of Certiorari issue to

revie w. the Judgment of the Court of Claims’ in the.

‘ abov entitle d case. ; . -

S OPINIONS BELOW

The opinions in the Court of Claims (Appendix, ’

pp. la-8a) are reported at 147 F. Supp. 7 39.

; JURISDICTION * |

The judgment of: the Court of. Claims was entered

on July -16, 1958 (Appendix, p. 4a). The juris-

diction of this Court is invoked under 28 UIN.C, 91255

(1). ;

ed

oe

~

QUESTIONS PRESENTED

Does the Manufacturers Excise Tax imposed upon

>the sald of refrigerators and related products apple

wto charges made by a maniatacturer for agreement -

Which obligate it te repaimor replace the cooling units |

in its produets should sueh units es during thie.

second tnrouge the fifi vear of use ?"* 0

STATUTES INVOLVED

Inte ral ze ‘venme. Code of 192

a

s eetion 3405. Tax oN MPGHANICAL RePRIGeR vrags,

Quick-Freeze UNrrs, AND SELF “CONTAINED, Mi

° CONDITIONING UNtts, ! os

There shall be inp msec Ol the following aunt leles

Cineluding im each ease paits or accessories: there.

for se on orin connection with the siile tHereal

sold by the manufacturer, producer, or importer

“a TaN pierre seve to 10 per centum of the price fer

ns which sO sold:

(a) Refrigerators and quick- freeze units,

Household type refrigerators (for single or mult

ple cabinet: installations) having, or bere

tnarily designed for use with, a nechamics|

frigerating unit operated by electricity, gas, kere

sene, or gasoline: household. type units for ti

quick freezing or ge " storage of foods, oper: ‘ted

by electricity, ga » kerosene, or sasoline: cot

'There is also’ presented the cnnlack whether he expense of

making good on a manufacturer's warranty constitutes a dise®unt,

rebate, or allowance for excise tax purposes. This same question

"is presented in the petition in No. 144, Ford Metor Co. vy. United

States. “In addition, if the main question is answered in the affirm

tive, a further, question. would ‘be presented: Do expenditures

incurred by manufacturers in’ carrying out repair and service.

agreements constitute a discount, rebate, or allowance for excise

tax purposes? , :

-

nations of such housek t 1\ ie (ee frigeraters aa

units. sig . t |

* a7 (7% - , ¥

** (4°) Air comddt loners, Self eontaied AKoeat -

Y ditioninggunits 53 Stat. #12. + ee

Section D406. ExcisccTaxes DMpost by cub eR Eve:

nee Act or 194]. ,

i me

t(n) Lup fitty There shall be Trnposed it

the following Articles, sw le the qamafdeturer,

f produce reo Porter Rat? quivalent te the rate,

ou the pricey ASY colek, set forth an the f follow-

eg pariteraphe’(inchidivs HW eaeh: cgse parts or

ae COSSOTIOS of sueéh arfie lf seld oor in ean hae tien

there with, or with theesale thereof):

* Sen? * fe

C3 Electrié, fas, Fd vil ap, wes on. elec:

ihe: = or oil pics hreaterss/).. 10 er centUunn

Section 3441. SaLe Prick. a >

(a) In determining for he PN POnes of this

‘chapter, the price) for whieh diy article is sold,

there shall be inelud@d any charse for eoverines

and containers of Whatever nature, ane ans chars

incident to placing the article in cond tion packed

ready for shipment, but there shall be. exGluded: >

the ameéunt of tax imposed hy this. chapter,

whether or not stated as a separate char@e. A

transportations delivery, dnstrance, installation,

or other charge (net reqnired by the for gs

sentence to be eluded) shall besexeluded from

the price only if the amount thereof is est hlished,

to the satisfaction, of the Conyiissioner, dn ac

cordance with the regulations.” 7 OSB State. 416.

Sec tion 3443, ( REDITS anp REFUNDS.

Cn) A eredit against tax under this chi iptery

ora refund, may be allowed or nuide--

« & * * °

(2) to any: person, whe bie pud tox ander

‘this-chapter with 1m sspeet te an article, When, the

\

so

4.

-_ price on which the tax: was based is readjusted ly.

‘reason of return or re possession of the article or i

covering or containers br by a bona fide discount.

rebate, or allowance; in the amount of that part

of the tax proportionate to the part of the price

— is refunded or credited.” |

STATEMENT

Petitioner manufactures and sells household | re-

frigerators and related products that are subject to

the Manufacturer’s Excise: Tax. Since “the 1920's

petitioner’s sales: price has included a charge for a

one-year warranty that constitutes a recognition’ by

petitioner of its obligation as a manufacturer to, pro-

‘ vide a product free from defects attributable to work

manship and material and other manufacturing er-

rors. This one-year warranty thus discharges “Tt

legal liability of petitioner. as a manufac turer,

‘In addition, petitioner sells a repair contract, Ue

99

a ** Protection Plan,” which obligates it to repair

replace the séaled cooling - unit in its refrigerators

should the unit wear out after the one- year warranty

has expired and. before thd end-of the fifth vear follow-

ing delivery to the initia purchaser” Petitioner com-

menced to se]] such contr ets 1 in 19. 333 and offered them

to the purchasers of its pPodt moan optional basis

*“*Wive-Year- Frotection Plan—We Warrant. every new 1936 °

Frigidaire Household Sealed-In Mechanical Unit to be free from

defeets in material and workmanship under normal use and serv-

ice, and we ‘will: within five years from date of delivery to the

original purchas r, replace without any cost to the customer, any

Sealed-In Mechanical Unit: which our examination shall disclose

to our satisfaction to be thus defective, provided, however, that by

so doing we shall not be obligated to replace the complete refrig-

erator. The: foregoing applies enly to the Seated-In Mechanical.

Unit under conditions specified herein, and does not apply’ to. any

other parts of the Frigidaire equipment pees: hereinafter. °

.--*

5 :

; / See Pee —

util 1986 0 Since, then petitioner has required that

repair contracts be purchased for refrigerators and

other products purchased. for individual -houschold

use. Seana 7

Petitioner made, a charge: of *5 for each repair.

contract and this case involves claims gone of

Manufacturer’s Excise Taxes paid .on: sich charges.

"The ‘question whethe y the Manufacturr’s Excise Tax .

ix applicable to this charge has been litigated in three

different cases before the Court of Claims. All three:

cases have involved the same law and the same con-

tract, vet three different and inconsistent answers have

-heen given.

In the first case, which covered chatges made from

May 10, 1937, through Decenber 31, 1941, General

Motors v. United States, 121 F. Supp. 932, cer- -

tiorari denied 348 U.S. 942, the Court of Claims.

held that although the charges made for ‘the repair

‘agreements weré subject to the Manufacturer's Excise

Tax, the expenses Incurred in carrying out such agrec-

ments were “allowances”? within the meaning of See-

‘tion 3443(a)(2) of the 1939 Code and predecessor

sections of the Revenue Acts, and: thus petitioner was

entitled, te ali appropriate’ refund. - In the ‘second

ease, General Motors v. United States, 146 F. Supp...

290, covering the period from January J, 1942, through .

December 31, 1944, a similar result was reached when —

the court below first ¢onsidered the case. .* vans

In the third case, the review of which this petition

seeks, a similar: refund Was sought ‘with respect’ to

the period January 1, 1945, through August 31, 1951.°

Petitioner requested) summary judgment which. was

denied on the growind. that the court has ‘heen *t wrong

in holding that [petitioner] was entitled to [a refund] _

5

o og

Pai

i

tax practic ally disappears.

WW ’ , . Fa a ‘ J

e * : o ° . ry

. t : e \ Cs P .

v. ; |

RS ce’ §: -@

as an ‘allowance... General Motors vy. United States,

147 F. Supp. 739. Instead, the court concluded that

“a refund was due for. the principal reason advanced

Ay petitiofier, and rejected by the court, in the first

two cases—namely that the charge muidé «for the

“repair agreement Was uatsubject to the Manufacturer's

Excise Tax ‘because it, was not part of the sales price,

duit Was an extra charge for an agreement to keep

certain parts of the refrigeraitay in repair beyond the ©

Period of the usual manufacthrer’s warranty.’ The

court there upon withdrew the opinion it had rendered

in petitioner's second case and entered judgment for

petitioner on the ground that the eharge for.the repair’

agreement -Was eee ans ES to the Manufacturer's

“Exeise Tax.

Inn its decision ii) petitioner” 's third. case, “the COUF

below held that the charge ‘for the repair agreenient

should be ex¢luded from the tax bas: to the ex-

tent that it was reasonable in amount, and further

> held that the-charge should **bear a ‘close relationship

to the actual cost of rendern & the service. When se

evasion of the CXCISE.

limited’... the opportuni

“he dase was referred

to a commissioner of the court to take evidence as te

the reasonableness of the $5 charge made by petitioner.

a ae the court also directed the commissioner

to take evidenee on the question of whether such

repaint agreements were custom ry in the t ‘ade during

tie vears involved.» ~ 4

On; theaevidence ‘submitted, the « commissioner found

that petitioner's large for the répair agreements Was

re bse related to the costs of making bepairs andl

vas reasonable in amount, and that such re pair acres

nie nts were customary in the trade.

because other mangfacturers in the trade sold similar.

~

(

°o

The Court of Claims, on July 16, 1958, adoptedthe:

commissioner's findings and. filed the opinion and

judgment here sought. to be reviewed. In that opin-

‘ion, the court reyersed its field once again and

held that the. repair agreements in question were ‘a

taxable part of the purchase price of the article sold’

repair agreements. Judge W hitaker, ‘dissenting, ad-

_hered to the position he had taken in the first decision

and consistently maintained throughout this litigation

—that a charge for a repair agreement is not subject to

the Manufacturer's Excise Tax.

REASONS FOR GRANTING me WRIT

The Court of Claims-has erroneously decided an im-

portant question of federal excise tax daw and has left

the question in such a state of confusion that review

by this Court is necessary, Absent an exercise of this

‘Court’s > certiors wit “Jurisdiction to. make ‘clear the

applic ‘ation of the questioned statutory provisions, the .

inconsistent and confused positions taken by the court

helow will render it impossible to predict the excise

tax’ consequences of the repair and - replacement

services conducted. by mue ‘h of the manufacturing

- industry.

Under Seetion 3405 a the Internal Revenue Code _

of 1939 an excise tax is imposed wpon the sale by

manufacturers of ‘refrigerators’? and “parts or ae-

cessories therefor,” which excise, so far as here rele-

vant, is a fixed percentage of “the price for which

[sue ‘h appliances are] so sold.” A charge by a manu-

a oat

*The questioned ex¢ise” tax provisions of the 1939 Code were

reenacted without signiBeant change as Sections 4111 and 6416

of the Tnternal -Revenue Code of 1954.

&

—_~

re . : ny

facturer for a service contrackat not subject to excise

tax. if it is not comprehended by the above language of

‘Seetion 3405, or if ita@s an “other charge’? whieh is

specifically excluded by ‘Section 3441(a). In the

event the re pair charge is faxed as part of “the price”

of the refrigerator, the cost of repairs or replacements

uder’ the service contract should constitute an,

allowance” under Section 3443(a) (27 whieh pemnits

a credit or refund of the excise paid if the ‘price’? of

a taxable article is ‘readjusted’ “by a bona. fide

oiliscount, rebate or allowance.”"' ) >

-

Tn short, a charge fora servic e agreement should be

exeluded’ from tax heeause it is not part of the price

of he article ov beeause it is an “other charge’ that

ix Specific ally excluded; if it is ineluded as ypart of

- the price, the actual cost of making” repairs. under

the agreement should be allowed as an adjustment to

the sale price. °

Though the legal questions thus presented are precise

and narrow, their resolution by the vourt below has -

heen inconsistent, halting and confused. Tn three

different cases the Court of Clainis has considered the

separate charge for and the éxpense incurred mder

*The Court “of Claiins has held that expenditures incurred, in

fulfilling a manufacturer's warranty and expenditures incurred

im carrying out repair agreements do prot come ‘within Seetion

3443(a) (2): The: first of these conclusions was reached by the

sage in this case and in Ford Notor ¢ ‘om pany v. United

tates, 156 BL Suppood. As noted above, there is pending befyre

this Court a petition for certiorari in the Ford case, Nor 144.

Octoher Term, 1958. The Ford case does not involve repair ;

agree ments for which an extra charge is.made. However, since

-it does present an important aspect. of dhe allowance question

the Court) may wish to consider the petition in the Ford case

tirether with the petition in gis case, 24 ’

‘ ; oc

% | by ;

. De) .

‘r

pree deely the same repair agreement. “The first time .

it found that a tux Was properly imposed’ on the

charge, but recognized that the expense of providing

repair services under the agreement constituted an

allowance, The second time it found ‘that noe tax

shotild he imposed tipon the charge for the repair

‘agreement to the extent it was reasonable in amount;

and the third tines it imposed a tax on the charge

——tnd refused to recognize that the expense of fulfilling

_ the repair ‘agreement constituted an allowance. Peti-,

eae has thus recovered in one case of one theory ;

in the second gase, on a different theory; ‘and in the

third Lise. hax heen denied any: recovery in a decision

whieh rejects both of the theeries previously em-

braced by the court. The third holding to which this

petition ix directed, rests largely, if not entirely, upon

1 significance which the court, attac ‘hed to the fact

tit gether manufacturers in’ the trade entered into

service and repair arrangements substantially similar

~ to those of. petitioner. o

Refrigerator manufactiirers do contract to provide

_ services of the kind covered by the service agreements

« Which petitioner sold. But nothing*is said or roa

in-the governing statute which would Impose a tax

the price of “service”? sold in connection with re-

frigerators. Nor ig there anything igpsthe legis-

lative history that: supports such a Ry: The

plain meaning ‘of the statute permits th impoi-

tion of the tax only upon the price ef the “article”

sold. Thus, the nl rational basis for the imposition

of the excise tied would he a tinding that the sale of a

refrigerator obligates a manufacturer to service it for

a period of five vears so that.a charge for an agreement

to provide such service is nierely part of the pricé of

the ‘‘article.””

/ om

4 ae

6

‘gation upon a manufacturer to

10

The record and conclusions of the court below _

establish, however, that repair is not part of the obli-

“gation imposed upon’a manufacturer through the sale -

of a-refrigerator. Only the terms of a specific agree-

ment such as petitioner made, would impose any obli-

air a refrigerator

two.to five years after it had }en put to use. That

manufacturers generally havyé entered into repair

agreements comparable to, those sold by petitioner can-

not in any way affect the service character of such

-

agreements or indicate that Congress intended to tax

them simply because they were entered into by manu-

facturers at the time the refrigerators were sold.

The fact that manufacturers generally contract to

provide repair services under agreements similar to

those sold by plaintiff establishes only that the |

question in this case involves substantial amounts of

money. It means that other manufacturers may have .

similar claims for refund and that excise tax collections

may be less if the governing statute is not extended to

cover the sale of repair ‘services by manufacturers.

Such considerations, however, are quite: irrelevant to

the question of statutory construction presented in this

ease. Cf. Dalehitc.y. United States, 346 U.S. 15, 60.4 >

If stich services are to he subject to the excise tax, it

is for Congress to so declare. .And in the absence of

such a declaration it is not open to the courts to amend

the statute to avoid a possible revenue loss.

The court below may have confused a repair agree-

ment with a warranty that a product is free from

defects, which is an integral feature of any manu

factured product. Tn an earlier deci ‘ision in this cask

the court referred to a warranty that -an artic ba

*

when Sold is in) good working condftion and free

‘from defects, and ‘stated that ‘the sales price in-

eludes such a warranty. More recently in the Ford *

Motor case, supra, the court again expressed the view

thatca warranty that an article is free from defects.

is an integral part of the produe t.° It would seem that

the portion of the price of a product attributable to

such a war attty would be subject to the excise tax

because the purchaser would be thus - receiving only

what he had a-right to receive—a refrigerator free

from defects in’ workmanship and material. In its

— final opinion, however, the court) ignored its pre-

ious acknowle “dgement that the one-year warranty

satisfied the manifacturer’ s obligation” to sella

sound refrigerator, and- taxed the charge for a’ re- «

pair agreement as if it) were. ne more than a

warranty against defects of workmanship and mate ‘rial.

Repair agreements are something quite different —

as the owner of an appliance such as a television set

will at once knows Assuming ‘perfect workmanship

and material, ordinary wear and tear will demand

repair and replacement of parts and components, As -

a matter of customer contentment and product

prestige nearly every appliance manufacturer will -

either undertake to provide repair service for at least

the more complicated components of his produet or

*. recommend to the customer that all specialized work on

the appliance be done by “anthorized dealers.’%.° To)

*The court below found that. the repair services performed by

pet.iiéner under the agreements in question were ‘attributable to

‘certain types of wear and tear!’ caused by the use of the refrigera-

tors or .to other factors beyond petitioner's control and not to

defects in) workmanship aid material or other manufacturing

4

12

the extent the former procedure has bees adopted shy

petitioner with respect to its refrigerators, it sells

service contracts obligating it to make any necessary-——

repairs-on_the.sealed-cooling unit (Se four vears afte:

the one-year, warranty has eXpired. The question

would not be, different were the period tem vears and

the product a televison picture tube.

*

Since the legal obligation of a manufacturer extends

only to defects of workmanship and material in the

product at the time of sale” a manufacturer need not

‘undertake, for any price, to repair his product after

it has been in-use for a period of years. Thus, as found

by the court below, petitioner did not sell repair agree-

ments for a substantial number of refrigerators sold

to multiple unit purchasers for other than household

use, (Findings 26 and 88, Appendix pp. 15a, 164,38: +.

Where such repair contracts were sold, however, the

sale was of a separate service quite apart from the

refrigerator and the legal obligations which its price

ineluded. Asa matter of statutory construction there

is ne basis for holding that the repair agreements were

errors. «The court noted that an example of the canse of om

wear and tear would be the ‘‘operation of the unit under low,

-voltage.”" In this connection, the court alsa found that sineg) the

early 1930°% repair agreements to provide service following the

expiration of the manufacturer's one-year warranty have. been ‘

widely sold in metropolitan afeaseby independent service arid

repair companies which neither manufacture nor sell the refrigera_.

tors covered by their repair agreements. - (Findings 57, ©1, 6°.

App. pp. 29a, 31a). If the court's reasoning be valid, the charge «

made by such non-manufacturing repair companies should alse

be subject to the excise tax: : «

;: . ey

® Section - 15(2), Uniform Sales Act, (1950 ed.); 1) Williston.

Sales § 232 (1948 ed.). i

13

”

a part of the article and that the price of the service

undertaking Was a part of the-price-of the article.’

Should the decision below he allewed te stand, a

statute which imposes a tax on the price for which

- selécted manufactured products are sold) will have-

deen used to exact a faxupon amounts received for

the performance of repair services,

_ Respondent al ued below thiat should the separate

service Charge be excluded from the tux base, an easy

device for reducing the proper amour 1 of excise would

he created, This argument involves a padding of the

price of the service agrec.. nt with a corresponding

_ decrease in the * price” of the refrigerater. The court

7 Other Federal agencies that h wy had oveasion to examine

‘into the eharacteristies of repair cogtfiimes have concluded that

they dy not represent‘a manufacturerpbligation but are separate

services agreements. , ;

4) The NRA Code, whieh was in effect during the period these

contracts were developed, specified the standard one-year warranty

us, the required olfigation of a manufacturer. Jt recognized the

existence of repair and replacement contracts, but exeluded them

‘from the price of a refrigerator and provided that they should be

the subject of ‘individual arrangements.

(hy) The specifient ions for refrigerators which the National

Hirean of Standards, in conjunction withvother agencies, devel-

oped*tfor the guidance of Federal Purchasing azetits from 1941

through 196 preseribed a one-vear warranty but made ne mention

cof repair contracts on sealed units: Clearly such a contract was

regarded as an extra atid net as amt ittegral part ofa refrigerator.

(e) Both the Office of Price Administration during World Wat

Il and the Offiee of Price Stabilization during the Korean War

~ Were reqiired to consider the proper pricing of refrigerators. Both

viewed the one-year warranty as an integral feature of a refriger-

ator and allowed the eX perines uttrabutable to its fulfillment to be

‘considered in) pricing the produet, Neithes regarded the repair -

agreemen’s as a part of the refrigerator and both regulated its

pricing, not as part of the product, but as a separate service.

a

y

helow—in its intermediate, opinion—reeognized the

/force of this argument and provided that no charge

should be exeluded from tax unless it Was established

to be reasonable in amount. Insofar as petitioner is

concerned, the court found the argument.to be without

merit since the entire charge was reasonably related to

_the services performed” But-aside from petitioner's

ease, Clear statutory kinguage must be respected even

though in some instances the language used by Con

gress might create tadministrative problems, Tf the

language needs correcting, Congress mist do it.’

‘ ; S

“The following facts were found by the Court below and are set,

forth, in Findings 72 and 78° > App. po sad:

When the repair agreement proctaim was first iostituted in 905

the charge was set at $5.00 cexcept as fe self-contained air eond!

tioners). This original charge was based on petitioner's determi-

“nation that the probalile cost for the repair of a single unit) would

be approximately $25.00 and that not more than 20 percent. of

the units sold would fecome inoperative during the four-vear

period of the agreement. On that basis it) was determined| that iW

charge of $5.00 paid by each purchaser would dnect the anticipated

costs. From 1936 to the. present time. however, petitioner has

antiually reviewed and reexamined its charge for ‘the agreements

by considering past experience, and making the best foreeast pos.

sible for a future period as to the mumber of- units whieh might

require repairs, the nature ofsthe repairs, atid the prospective-ecost

of the repairs. At all jtimes the charge arrived at was intended

to meet estimated expenses with a reasonable margin for possible

increases in cost and-errors in forecasting, Thus, the original

£5.00 charge has not been arbitrarily maintained froma the ineep-

tion-of the program throngh the period of this claim but has been

annually reviewed and reexamined. The -court thus found that:

the $5 fee ‘twas a reasonable charge.” Finding 94, App. p.4a.

"On January 9, 1956, after. the Court of Claims first opinion.

11 F.Supp. 82, the Treasury Department and the Joint Com

mittes on Internal ‘Revenue Taxation submitted a “Report: te the

House Subcommittee on Exeise Tax Technical and Administrative

Problems. tn thet report, Conuress was strongly urged to revise

15 :

Since the decision of the Court of Claimsyis entirely

without precedent'and raises serious and cOmptlicated

excise problems fOr a broad segment of the nation’s

industry, the absence of coutlicting- decisions in other

tribunals should not deter the Court from issuing the

writ. If: conflict in this area be needed, however,

the doctrine of “intra: circuit contliet’” warrants

san exercise of ‘this Court’s certiorari jurisdiction.

Ins accordance with that .doctrine, the Court ex-

ercises jurisdiction to resolvg, a question that - chas °

heen inconsistently decided in but one of the eleven

circuits, Certainly thre ¢ ‘ourt is warranted in clarifying

the confusion created by this case in view of the fact

that the Court of Claims ix vested with nationwide

jurisdiction in excise tax refund, suits, and is the only:

lower K ederal tribunal that enjoys such jurisdiction.

the re ‘evant prov isions of the 1954 Code to preclude the **allow-

ance” of expenses ine curred in the’ re pair ofa refrigerator under a

warranty, and to provide that the excise tax would apply ‘‘ where

the taxpayer makes a separate compulsory charge’’ for a repair con-

tract. Thus, the Treasury Department recommended that “ithe

definition of sale price for -purposes of the retailers’ and manu-

facturers’, taxes be amended to include specifically’ compulsory

charges for the warranty of the articles." It also asserted that

any report accompanying sich recommended legislation ‘should,

indicate that. these amendments are declaratory of the intent of

Congress as originally expressed in enacting seetion 6416(b) (1)

of the 1954 Code,and the corresponding provisions of the 1939

Code and prior laws.’ Despite these recommendations, Congress

‘refused to amend the provisions in question. This refusal is the

more significant since in the subsequent Forand Bill (H.R. 7125,

passed by both Houses of Congress and. now awaiting the approval

of the President), though Congress made major revision in-the ex-

cise tax provisions. of the 1954 Code, no change was'made in the

“definition of sale price’* or in the ‘‘allowance”’ provision.

Dickenson v. Petroleum Conversion Corp., 338 U.S. 507,' 508;

Maggio Vv. Zeit, 833 US. O68; he John Hancock Mutual oat Fn-

surance Co, Vv. Bartels, 308 ULS. 180.

16

ot CONCLUSION ‘

.

tablished by the findings of fact below, pe-

+ for sound business reasons and hot as ~part

"4 manufacturer’s obligation, ‘charged the pur-

‘eh¥sers of its refrigerators’a separate and reasonable

fee for long term repair eontracts covering the cooling .

units of such refrigerators. .'The ‘application sof the

Manufacturer’s Excise Tax to this fee results in the

collection of an excise on repair service charges—a Te-

sult achieved only by a clear eXtension of the governing

statute.

‘The Court of Claims has thus erroneously decided

a question. of substantial importance which, for the

reasons stated, should be reviewed: by this Court. Ae

cordingly, the petition for a write of certiorari should

be granted. Kins Ae.

ew °

Respectfully submitted,

‘ ; NEWELL W. ELLISON

> ; . tas

, , Attorney for Petitioner

Hexry M.-Hocan Sa | :

Danie M. Grippon |

C'aALVERT THOMAS ;

Covincton & BURLING |

Of Counsel

August, 1958 Se

a