State v. American Brass, Inc.

L. CHARLES WRIGHT, Retired Appellate Judge. American Brass, Inc., filed petitions for a refund of state and Henry County sales taxes with the .Alabama Department of Revenue. The Department denied the petitions. American Brass appealed the denial to the Administrative Law Division. Following a hearing, the administrative law judge determined that American Brass was not entitled to the refund. The Commissioner of the Department adopted the administrative law judge’s recommendation. American Brass appealed the order to the Circuit Court of Henry County. Following a hearing, the circuit court held that American Brass was [921] entitled to the refund. The Department appeals. The primary issue on appeal is whether American Brass qualifies for a refund under § 40-23-4(14), Code 1975. That section provides for an exemption of sales taxes on “[t]he gross proceeds of the sale or sales of fuel oil purchased as fuel for kiln use in manufacturing establishments.” The determinative issue is whether the device used by American Brass in its manufacturing process is a “kiln” within the purview of § 40-23-4(14). The parties stipulated to the relevant facts surrounding American Brass’s operation. Those facts are as follows: “The Taxpayer is in the business of manufacturing and processing brass and bronze ingots. The Taxpayer maintains a large inventory of nonferrous scrap metals, including zinc, which is mixed with copper to make brass, and tin, which is mixed with copper to make bronze. When purchased, the scrap is inspected, categorized, weighed, graded for composition and placed into inventory to meet the specifications of the order. “The materials are melted together in one of three large rotating ovens operated by the Taxpayer. Each device is interlined with firebrick, cylindrical in shape, stands approximately fifteen feet tall, and has a capacity when full of approximately 90,000 to 100,000 pounds. When in operation, the oven rotates continuously and heat is provided by fuel oil burners located at one end of the cylinder. The fuel oil used in said burners is the subject of this appeal. “A sample is taken during the mixing process and tested by the Taxpayer in its testing laboratory. Specific metals are then added as necessary to conform the product to the requirements of the order. When the correct composition is reached, the product is poured into ingot molds, cooled, cleaned, and shipped to the customer.” American Brass contends that the devices used in its manufacturing process are “Mins.” It maintains, therefore, that the fuel oil used in the process is exempt from sales tax. The Department, on the other hand, maintains that the devices used by American Brass are furnaces, or blast furnaces, and are not subject to the § 40-23^1(14) exemption. The administrative law judge, in his recommended order, determined that the devices used by American Brass were not kilns within the meaning of § 40-23^4(14). The commissioner adopted the recommended order in its entirety. The circuit court, perfunctorily, found the devices used in the manufacturing process to be kilns. We agree with the well-reasoned order of the administrative law judge and adopt the following language of his order as our own: “The word ‘kiln’ is not defined in the revenue code. In such eases, a word must be given its plain, ordinary meaning, which is accepted in popular everyday usage. Darks Dairy, Inc. v. Alabama Dairy Comm’n, 367 So.2d 1378 [Ala.1979]; Guthrie v. Civil Service Board of Jasper, 342 So.2d 372 [Ala.Civ.App.1977]; Republic Steel Corp. v. Horn, [268 Ala. 279,] 105 So.2d 446 [Ala.1958]. “Research reveals a number of definitions and uses for a kiln, some of which are set out below: “The American Heritage Dictionary, Second College Edition, provides the following definition: “ ‘Kiln, Any of various ovens for hardening, burning or drying substances as grain, meal, or clay, esp. a brick-lined oven used to bake or fire ceramics.’ “Webster’s New International Dictionary, Second Unabridged Edition, defines the word as follows: “ ‘Kiln: A large stove or oven; a furnace of brick or stone, or a heated chamber, for the purpose of hardening, burning, or drying anything; often specif., a brieklin, a lime kiln or a cement kiln.’ “The New Columbia Encyclopedia, Fourth Edition, states as follows: “ ‘Kiln, furnace for firing pottery and enamels, for maMng brick, charcoal, lime, and cement, for roasting ores, and for drying various substances (e.g. lumber, chemicals). Kilns may be updraft or downdraft; round, conical, annular, or [922] rectangular; arranged for intermittent or continuous firing and of the multiple double-wall, or direct contact type, as required. Rotary kilns are much used in continuous processing, including cement manufacturing and the drying of granular materials. They consist of long tubes lying almost horizontally that are rotated slowly as heat is applied to the tube. Fuel used may be electricity, oil, gas, or coal. The temperature of firing and the length of time required depend on the design of the kiln and the type of material being fired.’ “The most indepth and helpful description of a kiln is provided by the McGraw-Hill Encyclopedia of Science and Technology, Fifth Edition, as follows: “‘A device or enclosure to provide thermal processing of an article or substance in a controlled temperature environment or atmosphere, often by direct convection or radiation heat transfer. Kilns are used in many different industries, and the type of device called a kiln varies with the industry. “ ‘ “Kiln” usually refers to an oven or furnace which operates at sufficiently high temperature to require that its walls be constructed of refractory materials. The distinction between a kiln and a furnace is often based more on the industry than on the design of the device. For instance, an electrically heated refractory tunnel oven equipped with a stainless mesh conveyor belt to carry the work through is referred to as a tunnel kiln if it is used for sintering small ceramic electronic parts such as ferrite transformer cores. The same device used to sinter small metal parts from powdered aluminum alloys is called a sintering furnace. “‘Generally the word “kiln” is used when referring to high-temperature of non-metallic materials, such as in the ceramic, the cement, and the lime industries, when melting is involved, as in steel manufacture, the term “furnace” is used, as in blastfurnace and basic oxygen furnace. In glass manufacture, the melting furnace is often called a glass tank when the process is continuous. (Emphasis supplied.)’ “From the above authorities, it can be said that rotary kilns are used for calcining various materials, such as rock, clays, granular materials, etc. Calcining is the heating of a substance below the melting or fusing point, causing a loss of moisture reduction or oxidation. In other words, a kiln is generally used to dry or bake various materials, but is not used to melt or fuse metal. As set out above, a device used for the melting of metal is commonly known as a furnace. Further, in Casting Brass, by C.W. Amman, the author discusses the melting of various brass items, and describes the various types of furnaces that are generally used for such purposes. None are described as kilns. “The only Alabama case on point is Republic Steel Corp. v. Horn, supra, in which the Alabama Supreme Court in 1958 determined that an open hearth furnace used in the making of steel did not qualify as a kiln under the exemption statute in question. The Court reached its conclusion through application of the commonly accepted definition for kiln, as is necessary in the present case. The Court also applied the well-recognized principle that an exemption from taxation must be construed against the taxpayer and for the taxing authority. Brundidge Milling Co. v. State, [45 Ala.App. 208,] 228 So.2d 475 [Ala.Civ.App.1969]; Bean Dredging Corp. v. State, 454 So.2d 1009 [Ala.Civ.App.1984].... “While in some instances the words ‘kiln’ and ‘furnace’ can be used interchangeably, a kiln is generally used with reference to the high temperature treatment of nonmetallic materials such as ceramic and cement, whereas any oven used in the melting and manufacture of metal constitutes a furnace. Accordingly, it must be determined that the ovens or devices used by the Taxpayer in its manufacturing process are not kilns within the purview of § 40-23^4(14), and thus, the fuel oil used in said devices is not exempt from sales tax.” The judgment of the circuit court is reversed. [923] The foregoing opinion was prepared by Retired Appellate Judge L. CHARLES WRIGHT while serving on active duty status as a judge of this court under the provisions of § 12-18-10(e), Code 1975, and this opinion is hereby adopted as that of the court. REVERSED AND REMANDED. All the Judges concur.