Pummilli v. Riordan

HAZEL, District Judge. This is a motion in an action in equity to restrain the Collector of Internal Revenue for this district from collecting taxes and penalties levied by him upon the plaintiff under the provisions of section 35 of the National Prohibition Act (41 Stat. 317). The assessment and accruing penalty amount to $533.76. The bill avers that the plaintiff sold beer in the city of Buffalo containing an alcoholic content, as claimed by the Commissioner of Internal Revenue, in excess of one-half of 1 per cent., in violation of the National Prohibition Act, commonly known as the Volstead Act; that no revenue taxes are collectible for the manufacture and sale of beer, since such manufacture and sale is prohibited by law; that the assessment and penalties imposed are for violations of the criminal statute, and not for [847] violation of any revenue laws, and accordingly the assessment and levy in question is unlawful, and not legally collectible, since all penalties in violation of the Volstead Act are penalties for crimes and misdemeanors, and not for nonpayment of taxes. The government objected to the jurisdiction of the court, and sought a cancellation of the temporary stay on the ground that the bill is without equity. Title I, section 2, and title II, section 2, of the act under consideration, vest certain powers and duties in the Commissioner of Internal Revenue, his assistants, agents, and inspectors, in the prosecution of offenders, and in having them held for the grand jury. By section 28 power is vested in such officers to enforce the provisions of the Volstead Act, or any provision thereof, which is conferred by law for the enforcement of existing laws relating to the manufacture and sale of intoxicating liquors under the law-of the United States, and section 35 reads: “All provisions of law that are inconsistent with this act are repealed only to the extent of such inconsistency and the regulations herein provided for the manufacture or traffic in intoxicating liquor shall be construed as in addition to existing laws. This act shall not relieve anyone from paying any taxes or other charges imposed upon the manufacture or traffic in such liquor. No liquor revenue stamps or tax receipts for any illegal manufacture or sale shall be issued in advance, but upon evidence of such illegal manufacture or sale a tax shall be assessed against, and collected from, the person responsible for such illegal manufacture or sale in double the amount now provided by law, with an additional penalty of $500 on retail dealers and $1,000 on manufacturers. The payment of such tax or penalty shall give no right to engage in the manufacture or sale of such liquor, or relieve any one from criminal liability, nor shall this act relieve any person from any liability, civil or criminal, heretofore or hereafter incurred under existing laws. “The commissioner, with the approval of the Secretary of the Treasury, may compromise any civil cause arising under this title before bringing action in court; and with the approval of the Attorney General he may compromise any such cause after action thereon has been commenced.” [t] It seems reasonably clear that Congress intended to repeal only such parts of the existing laws as are inconsistent with this act, while any provisions remaining in harmony therewith were retained. For violating the Volstead Act by manufacturing or dealing in intoxicating liquor a person is not relieved from paying taxes or other charges imposed by the Commissioner simply because he also subjects himself to criminal liability. Although no tax receipts are issuable by the collector of internal revenue in advance, or licenses granted for manufacturing or dealing in such liquor, still persons who disobey the law subject themselves to a double liability, viz. punishment for criminal violation, and assessment of a tax against them to be collected as section 35 states “from the person responsible for such illegal manufacture or sale in double the amount-now provided by law, with an additional penalty of $500 on retail dealers and $1,000 on manufacturers.” Such a provision for both a civil remedy and a criminal punishment is not void. U. S. v. One Ford Automobile and Fourteen Packages of Distilled Spirits (C. C. A.) 262 Fed. 374. The regulations embodied in the National Prohibition Act, it will he observed, are an addition to the existing laws. It is true that, before [848] there may be an assessment with a penalty, there must be evidence of illegal manufacture or sale; but the term “evidence” implies a state of facts from which inferences may be drawn as to the existing facts, and does not, in my opinion, mean judicial evidence received under the rules of legal procedure. Although it is not specified that the tax assessed for illegal manufacture or sale may be collected by summary procedure, still I think effect must be given to section 28, which makes clear the intention of Congress that the Commissioner of Internal Revenue retained under the Volstead Act the power which existed at the time of its enactment for enforcing criminal laws relating to the manufacture or sale of intoxicating liquors, or any provision thereof which is conferred by law for the enforcement of existing laws, etc. See, also, section 23. Congress is presumed to have been familiar with the law that no suit for the purpose of restraining the assessment or collection of any tax is maintainable in any court, and no doubt purposely retained the enforcement of the taxing feature for illegal manufacture or sale according to the existing revenue laws. Importance is attached to the authority given the Commissioner to compromise any civil cause arising under title II, and it is argued that a fair construction of the clause is that penalties imposed must be recovered in a civil action or recovered as an additional penalty in a sentence after conviction by the trial court. But any such construction of the phrase “civil cause” would be illiberal, in view of the character óf civil actions that may be brought in the name of the United States Under the provisions of the act. The case cited by the plaintiff in support of his main contention, U. S. v. Windham (D. C.) 264 Fed. 376, is not believed applicable. The defendant in that case was criminally indicted under the internal revenue -laws after the Volstead Act was passed, and the court held that the latter act, in this particular, was .inconsistent with the statute under which the indictment was found. The former act no doubt was superseded by the later as to the character of the offenses arising from illegal dealing in intoxicating liquor. The penalties for similar offenses were different, and, as stated by the learned court, the existing provisions providing for punishment were repealed to that extent. In this case, however, we are not concerned with the criminal feature of the revenue laws, or with an attempt to try an offender twice, or punish him twice, for the same offense. [2] The sole question is whether the tax and charges for illegal dealing imposed by the Commissioner of Internal Revenue under the provisions of the act are collectible by the mode of procedure prescribed by the existing internal revenue law, or whether its enforcement is required by criminal prosecution or in a civil action. The answer is that the procedure for collecting the taxes assessed for the illegal manufacture or sale of liquor with the additional penalty is governed by the internal revenue law, and such procedure in my opinion is not inconsistent with the National Prohibition Act, and is not repealed by implication. In U. S. v. Yuginni (D. C.) 266 Fed. 746, the court broadly held that one who manufactures liquor in violation of the Prohibition Act, though liable for the tax thereon, must nevertheless be proceeded [849] against under the Prohibition Act, and not the revenue statute. But this decision was in a criminal case, wherein the defendant was indicted for violation of the Internal Revenue Act and the court, as I read the opinion, held (properly, I think) that a prosecution by indictment for engaging in the business oí a distiller without having paid the tax required by law must be tinder the Prohibition Act, and not the revenue statute. The motion is denied.