Baldwin v. Missouri, 281 U.S. 586 (1930)
Case details
Citation
281 U.S. 586
Full caption
BALDWIN et al . v. MISSOURI.
Country
United States
Jurisdiction
Federal
Court
Supreme Court of the United States
Decided
May 26, 1930
BALDWIN et al . v. MISSOURI.
ERROR TO AND APPEAL FROM THE SUPREME COURT OF MISSOURI.
No. 417. Argued April 23, 1930.—Decided May 26, 1930.
A resident of Illinois, dying there, willed all her property to her son, also a resident of that State. The will was probated in Illinois and an inheritance tax was there laid upon all her intangible personalty, wherever situate. At the time of her death she owned credits for cash deposited in banks located in Missouri, and coupon bonds of the United States and promissory notes, all physically within that State. Some of the notes had been executed by citizens of Missouri, and some were secured on lands there. Held that the credits, bonds and notes were not within the jurisdiction of Missouri for taxation purposes, and that to enforce Missouri transfer or inheritance taxes reckoned upon their value would violate the due process clause of the Fourteenth Amendment. P. 591.
323 Mo. 207, reversed.
Appeal from a judgment of the Supreme Court of Missouri, which reversed a judgment of the state Circuit Court and sustained an inheritance tax, assessed by the Probate Court, which the Circuit Court, on appeal, had found invalid.
Messrs. John F. Garner and Harry Carstarphen, for plaintiffs in error and appellants.
A bank deposit is an ordinary debt. Blodgett n . Silberman, 277 U. S. 1. Bonds and notes are not things tangible, but Are evidences of debt only. Blodgett n . p. 587586 Argument for Appellee.
Silberman, supra; State Tax on Foreign Held Bonds, 15 Wall. 300; Rhode Island Hospital Trust Co. v. Doughton, 270 U. S. 69; Farmers Loan & Trust Co. n - Minnesota, 280 U. S. 204.
It may no longer be questioned that the situs of intangible personal property is the domicile of the owner of the choses in action or debt. Frick v. Pennsylvania, 268 U. S. 473; Rhode Island Trust Co. n . Doughton, supra; Farmers Loan & Trust Co. v. Minnesota, supra; Safe Deposit & Trust Co. v. Virginia, 280 U. S. 83.
To avoid confiscation of property and yet to give full force and effect to constitutional taxing provisions, only one State should be permitted to tax the devolution of the same property and that State is the State of the legal situs.
Messrs. Stratton Shartel, Attorney General of Missouri, and A. M. Meyer, Assistant Attorney General, with whom Mr. Lieutellus Cunningham, Assistant Attorney General, was on the brief, for defendant in error and appellee.
This case, so far as it relates to a tax measured by bank deposits, is distinguishable from Farmers Loan & Trust Co. v. Minnesota, 280 U. S. 204, and it is not necessarily within the principle criticized in that case as having formed the basis of Blackstone v. Miller, 188 U. S. 189.
To sustain the tax it is not necessary to say that a chose in action necessarily has a situs for taxation purposes at the domicile of the debtor, nor that the Fourteenth Amendment does not prevent the taxation of the same property by different States upon inconsistent principles.
Succession and inheritance taxes may be measured by the value of the United States bonds of a non-resident decedent when found within the jurisdiction of the State levying the tax. Blackstone v. Miller, supra.
On this phase the case differs from Farmers Loan & Trust Co. v. Minnesota, in that here the evidences of debt were actually present in Missouri.
Succession and inheritance taxes may be measured by the value of promissory notes secured by mortgages on Missouri real estate and owed by residents of Missouri, where the notes and securities were in Missouri, even though they belonged to the estate of a non-resident decedent. In re Merriam’s Estate, 147 Mich. 630; Blackstone v. Miller, 188 U. S. 189.
The unsecured notes probably stand on the same footing as the bank deposits, save that the record does not disclose that any evidence of indebtedness issued by the bank to the decedent was found in Missouri.
Mr . Justic e Mc Reynolds delivered the opinion of the Court.
The validity of Sec. 558, R. S. of Missouri, 1919, was duly challenged in the court below; by the judgment there the rights of the parties were finally determined; the cause is properly here on appeal.
While a resident of Quincy, Adams County, Illinois, Carrie Pool Baldwin died, October 4, 1926. By will she left all her property to Thomas A. Baldwin, her son, a resident of the same place, and appointed him sole executor. The will was duly probated at her residence and under the statute of Illinois an inheritance tax was there laid upon the value of all her intangible personalty, wherever situated.
Ancillary letters of administration with the will annexed issued out of the probate court of Lewis County, Missouri, to Harry Carstarphen, October 22, 1926. A report to that court revealed that at the time of her death Mrs. Baldwin owned real estate in Missouri; credits for cash deposited with two or more banks located there; also certain coupon bonds issued by the United p. 589States and sundry promissory notes which were then physically within that State. Most of these notes were executed by citizens of Missouri and the larger part were secured by liens upon lands lying therein.
Under Sec. 558, R. S. 1919,* (copied in margin) the State of Missouri demanded transfer or inheritance taxes reckoned upon the value of all the above described property. No denial of this claim was made in respect of the real estate; but as to the personalty it was resisted upon the ground that the property was not within the jurisdiction of the State for taxation purposes and to enforce the demand would violate the due process clause of the Fourteenth Amendment.
*
Section 558, Revised Statutes of Missouri, 1919, Chapter 1, Article XXI: “A tax shall be and is hereby imposed upon, the transfer of any property, real, personal or mixed or any interest therein or income therefrom, in trust or otherwise, to persons, institutions, associations, or corporation, not hereinafter exempted, in the following cases: When the transfer is by will or by the intestate laws of this state from any person dying possessed of the property while a resident of the state. When the transfer is by will, or intestate law of property within the state or within the jurisdiction of the state and decedent was a non-resident of the state at the time of his death. When the transfer is made by a resident or by a non-resident when such non-resident’s property is within this state, or within its jurisdiction, by deed, grant, bargain, sale or gift made in contemplation of the death of grantor, vendor or donor, or intending to take effect in possession or enjoyment at or after such death. Every transfer by deed, grant, bargain, sale or gift made within two years prior to the death of grantor, vendor or donor, of a material part of his estate or in the nature of a final disposition or distribution thereof without an adequate valuable consideration shall be construed to have been made in contemplation of death within the meaning of this section. Such tax shall be imposed when any person, association, institution or corporation actually comes into the possession and enjoyment of the property, interest therein, or income therefrom, whether the transfer thereof is made before or after the passage of this act: Provided, that property which is actually vested in such persons or corporations before this act takes effect shall not be subject to the tax,”
The Lewis County Circuit Court declared the transfer of the personal property not subject to taxation; the Supreme Court reached a different conclusion and directed payment.
It does not appear and is not claimed that either the decedent or her son ever resided in Missouri. The record discloses nothing tending to show that the personal property had been given a business situs in that State.
Among other things, the Supreme Court said—
“ In recent cases we have held, for the purpose of property tax, that the situs of a credit is the domicile of the creditor, . . .
“ If we could apply the same rule to an inheritance tax, we might have less difficulty in disposing of this case. The inheritance tax statute, Article XXI, Ch. 1, R. S. 1919, provides an entirely independent method of ascertaining the property subject to inheritance tax from that applicable for general tax. The definition of the term ‘ property ’ in the last section, 589, of that Article, makes inapplicable any definition relating to general property tax. An inheritance tax is not a property tax, but an excise tax, or a tax upon succession. (In re Zook’s Estate, 317 Mo. 986, 296 S. W. 780, and cases cited.) . . .
li These notes, bonds and cash were all in the possession of the administrator in Missouri. For what purpose they were in Missouri is not shown. We cannot assume that they were in the State of Missouri for the purpose of escaping taxation in the State of Illinois. It is a reasonable inference that the cash and notes in such large quantities in Missouri, when none of it was held in Illinois, was retained in this State for the purpose of investment. They may have established a business situs in this State, in which case it would be subject to a general tax as well as the inheritance tax. . . .
11 It [the personalty] possibly acquired a business situs in this State. Whether it did or not it was within the p. 591jurisdiction of the State and property subject to the transfer tax. It would have been a proper subject of inquiry by the trial court to determine how and why and under what conditions these evidences of debt were in this State, but whatever the determination of that question the property was legally within the jurisdiction of the probate court of Lewis county in this State and subject to the tax.”
The challenged judgment rests upon the broad theory that a State may lay succession or inheritance taxes measured by the value of any deposits in local banks passing from a non-resident decedent; also upon the value of bonds issued by the United States and promissory notes executed by individual citizens of the State, when devised by such non-resident, if these bonds or notes happen to be found within the confines of the State when death occurs. The cause was decided below prior to our determination of Farmers Loan & Trust Co. v. Minnesota, 280 U. S. 204. Blackstone v. Miller, 188 U. S. 189, was cited in support of the conclusion reached. Considering Farmers Loan & Trust Co. v. Minnesota and previous opinions there referred to, the theory upon which the court below proceeded is untenable and its judgment must be reversed.
Ordinarily, bank deposits are mere credits and for purposes of ad valorem taxation have situs at the domicile of the creditor only. The same general rule applies to negotiable bonds and notes, whether secured by liens on real estate or otherwise.
In Kirtland v. Hotchkiss, 100 U. S. 491, 498, 499, this Court declared—
11 Plainly, therefore, our only duty is to inquire whether the Constitution prohibits a State from taxing, in the hands of one of its resident citizens, a debt held by him upon a resident of another State, and evidenced by the bond of the debtor, secured by deed of trust or mortgage p. 592upon real estate situated in the State in which the debtor resides.
“ The question does not seem to us to be very difficult of solution. The creditor, it is conceded, is a permanent resident within the jurisdiction of the State imposing the tax. The debt is property in his hands constituting a portion of his wealth, from which he is under the highest obligation, in common with his fellow-citizens of the same State, to contribute for the support of the government whose protection he enjoys.
“ That debt, although a species of intangible property, may, for purposes of taxation, if not for all others, be regarded as situated at the domicile of the creditor. It is none the less property because its amount and maturity are set forth in a bond. That bond, wherever actually held or deposited, is only evidence of the debt, and if destroyed, the debt—the right to demand payment of the money loaned, with the stipulated interest—remains. Nor is the debt, for the purposes of taxation, affected by the fact that it is secured by mortgage upon real estate situated in Illinois. The mortgage is but a security for the debt, and, as held in State Tax on Foreign-held Bonds, supra [15 Wall. 300], the right of the creditor ‘to proceed against the property mortgaged, upon a given contingency, to enforce by its sale the payment of his demand, . . . has no locality independent of the party in whom it resides. It may undoubtedly be taxed by the State when held by a resident therein,’ etc. Cooley on Taxation, 15, 63, 134, 270. The debt, then, having its situs at the creditor’s residence, both he and it are, for the purposes of taxation, within the jurisdiction of the State.”
And in Blodgett v. Silberman, 277 U. S. 1, 14—
“ The question here is whether bonds, unlike other choses in action, may have a situs different from the owner’s domicile such as will render their transfer taxable in the State of that situs and in only that State. We think p. 593bonds are not thus distinguishable from other choses in action. It is not enough to show that the written or printed evidence of ownership may, by the law of the State in which they are physically present, be permitted to be taken in execution or dealt with as reaching that of which they are evidence, even without the presence of the owner. While bonds often are so treated, they are nevertheless in their essence only evidences of debt. The Supreme Court of Errors expressly admits that they are choses in action. Whatever incidental qualities may be added by usage of business or by statutory provision, this characteristic remains and shows itself by the fact that their destruction physically will not destroy the debt which they represent. They are representative and not the thing itself.”
We find nothing to exempt the effort to tax the transfer of the deposits in Missouri banks from the principle applied in Farmers Loan & Trust Co. v. Minnesota, supra. So far as disclosed by the record, the situs of the credit was in Illinois, where the depositor had her domicile. There the property interest in the credit passed under her will; and there the transfer was actually taxed. This passing was properly taxable at that place and not otherwhere.
The bonds and notes, although physically within Missouri, under our former opinions were choses in action with situs at the domicile of the creditor. At that point they too passed from the dead to the living, and there this transfer was actually taxed. As they were not within Missouri for taxation purposes the transfer was not subject to her power. Rhode Island Trust Co. N. Doughton, 270 U. S. 69.
It has been suggested that should the State of the domicile be unable to enforce collection of. the tax laid by it upon the transfer, then in practice all taxation thereon might be evaded. The inference seems to be that
98234°—30-------38
double taxation—by two States on the same transfer—should be sustained in order to prevent escape from liability in exceptional cases. We cannot assent. In Schlesinger v. Wisconsin, 270 U. S. 230, 240, a similar notion was rejected.
“ The presumption and consequent taxation are defended upon the theory that, exercising judgment and discretion, the legislature found them necessary in order to prevent evasion of inheritance taxes. That is to say, ‘A’ may be required to submit to an exactment forbidden by the Constitution if this seems necessary in order to enable the State readily to collect lawful charges against 1B? Rights guaranteed by the federal Constitution are not to be so lightly treated; they are superior to this supposed necessity. The State is forbidden to deny due process of law or the equal protection of the laws for any purpose whatsoever.”
If the possibility of evasion be considered from a practical standpoint, then the federal estate tax law, under which credit is only allowed where a tax is paid to the State, Sec. 1093, Title 26, U. S. C., must be given due weight. Also, the significance of the adoption of reciprocal exemption laws by most of the States, Farmers Loan & Trust Co. v. Minnesota, supra, cannot be disregarded.
Normally, as in the present instance, the State of the domicile enforces its own tax and we need not now consider the possibility of establishing a situs in another State by one who should undertake to arrange for succession there and thus defeat the collection of the death duties prescribed at his domicile.
This cause does not involve the right of a State to tax either the interest which a mortgagee as such may have in lands lying therein, or the transfer of that interest.
Reversed. The cause will be remanded to the Supreme Court of Missouri for further proceedings not inconsistent with this opinion.
586 Hol mes , J., dissenting.
Mr . Just ice Holmes .
Although this decision hardly can be called a surprise after Farmers Loan & Trust Co. v. Minnesota, 280 U. S. 204 and Safe Deposit & Trust Co. v. Virginia, 280 U. S. 83, and although I stated my views in those cases, still, as the term is not over, I think it legitimate to add one or two reflections to what I have said before. I have not yet adequately expressed the more than anxiety that I feel at the ever increasing scope given to the Fourteenth Amendment in cutting down what I believe to be the constitutional rights of the States. As the decisions now stand, I see hardly any limit but the sky to the invalidating of those rights if they happen to strike a majority of this Court as for any reason undesirable. I cannot believe that the Amendment was intended to give us carte blanche to embody our economic or moral beliefs in its prohibitions. Yet I can think of no narrower reason that seems to me to justify the present and the earlier decisions to which I have referred. Of course the words “ due process of law,” if taken in their literal meaning, have no application to this case; and while it is too late to deny that they have been given a much more extended and artificial signification, still we ought to remember the great caution shown by the Constitution in limiting the power of the States, and should be slow to construe the clause in the Fourteenth Amendment as committing to the Court, with no guide but the Court’s own discretion, the validity of whatever laws the States may pass. In this case the bonds, notes and bank accounts were within the power and received the protection of the State of Missouri; the notes, so far as appears, were within the considerations that I offered in the earlier decisions mentioned, so that logically Missouri was justified in demanding a quid pro quo; the practice of taxation in such circumstances I think has been ancient and widespread,
Sto ne , J., dissenting. 281U. S.
and the tax was warranted by decisions of this Court. Liverpool & London & Globe Ins. Co. v. Assessors for the Parish of Orleans, 221 U. S. 346, 354, 355. Wheeler v. Sohmer, 233 U. S. 434. (I suppose that these cases and many others now join Blackstone v. Miller on the Index Expwrgatorius—but we need an authoritative list.) It seems to me to be exceeding our powers to declare such a tax a denial of due process of law.
And what are the grounds? Simply, so far as I can see, that it is disagreeable to a bondowner to be taxed in two places. Very probably it might be good policy to restrict taxation to a single place, and perhaps the technical conception of domicil may be the best determinant. But it seems to me that if that result is to be reached it should be reached through understanding among the States, by uniform legislation or otherwise, not by evoking a constitutional prohibition from the void of ‘ due process of law,’ when logic, tradition and authority have united to declare the right of the State to lay the now prohibited tax.
Mr . Justic e Brandeis and Mr . Justice Stone agree with this opinion.
Opinion of Mr . Justi ce Stone .
I agree with what Mr . Justice Holmes has said, but as I concurred, on special grounds, with the result in Farmers Loan & Trust Company v. Minnesota, 280 U. S. 204 and Safe Deposit & Trust Company n . Virginia, 280 U. S. 83,1 would say a word of the application now given to those precedents. I do not think that the overturning of one conclusion in Blackstone v. Miller by those cases should be deemed to carry with it Scottish Union & National Insurance Co. v. Bowland, 196 U. S. 611, Wheeler v. Sohmer, 233 U. S. 434, upholding a tax measured by a non-resident’s bonds and notes, located within the taxing p. 597state; Savings Society n . Multnomah County, 169 U. S. 421, upholding a tax measured by a non-resident’s notes, secured by mortgages on land within the taxing state; or Bristol v. Washington County, 177 U. S. 133 and Metropolitan Life Insurance Co. v. New Orleans, 205 U. S. 395, upholding a tax upon intangibles having a “business situs ” within the taxing state, but owned by a non-resident. These cases rest upon principles other than those applied in Blackstone v. Miller and are not dependent upon it for support.
It is true that the bonds and notes located in Missouri are choses in action, rights in which may be transferred at the domicil of the owner as well as in any other state in which he may chance to be. But the transfer made there is not completely effected without their delivery, which ordinarily can be compelled only in Missouri and in accordance with its laws. If negotiable, which so far as appears some of them were, their transfer by delivery within Missouri could defeat the transfer made in Illinois. When secured by mortgage on real estate, the transfer of the security, which is an inseparable incident of the chose in action, Carpenter v. Longan, 16 Wall. 271, Lipscomb v. Talbott, 243 Mo. 1, 31, may be affected by the recording laws, availed of only through the recording facilities where the land is located. See Pickett v. Barron, 29 Barb. 505; Curtis v. Moore, 152 N. Y. 159, 163.
These circumstances, I think, are sufficient to give the jurisdiction which I thought lacking in Farmers Loan & Trust Company v. Minnesota, to tax the transfer in Missouri, see Hatch v. Reardon, 204 U. S. 152 and Rogers v. Hennepin County, 240 U. S. 184; to say nothing of the further fact that Missouri laws alone protect the physical notes and bonds and the security located there. Apart from the question of jurisdiction, that one must pay a tax in two places, reaching the same economic interest, with respect to which he has sought and secured the bene-
Sto ne , J., dissenting. 281U. S
fit of the laws in both, does not seem to me so oppressive or arbitrary as to infringe constitutional limitations.
Taxation is a practical matter and if, in the choice uf the rule we adopt, we may, as the Court has said in Farmers Loan <fc Trust Company v. Minnesota, give some consideration to its practical effect, we ought not, I think, to overturn long established rules governing the constitutional power to tax, without some consideration of the necessity and of all consequences of the change. Under the law as it has been, no one need subject himself to double taxation by keeping his securities in a state different from his domicil, or by seeking the protection of its laws for his mortgage investments. But it is a practical consideration of some moment that taxation becomes increasingly difficult if the securities of a non-resident may not be taxed where located, and where alone they may be reached, but where the courts are not open to the tax gatherers of the domicil. See Moore N. Mitchell, ante, p. 18, 30 F. (2d) 600; Colorado’ v. Harbeck, 232 N. Y. 71.
It is said that the present record discloses nothing tending to show that the decedent’s personal property had been given a business situs in Missouri. The Supreme Court of Missouri said: “ It is a reasonable inference that the cash and notes in such large quantities in Missouri, when none of it was held in Illinois, was retained in this state for the purpose of investment. They may have established a business situs in this state. . .
The burden is not on the state to establish the constitutionality of its laws, nor are we limited in supporting their constitutionality to the reasons assigned by the state court. I do not assume, from anything that has been said in this or the earlier cases, that constitutional power to tax the transfer of notes and bonds at their business situs, no longer exists. As this Court has often held, the burden rests upon him who assails a statute to p. 599586 Syllabus.
establish its unconstitutionality. Upon this ambiguous record it is for the appellant to show that the stock and bonds subjected to the tax had no business situs within the taxing jurisdiction. See Corporation Commission of Oklahoma v. Lowe, ante, p. 431; Toombs v. Citizens Bank of Waynesboro, decided this day, post, p. 643-
Mr . Justi ce Holme s and Mr . Just ice Brandeis join in this opinion.
CAMPBELL, FEDERAL PROHIBITION ADMINISTRATOR, et al . v. GALENO CHEMICAL COMPANY ET. AL.
SAME V. D. P. PAUL & COMPANY, INCORPORATED.
CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SECOND CIRCUIT.
Nos. 443 and 444. Argued April 25, 1930.—Decided May 26, 1930.
1
A basic permit granted under § 4, Title II, of the Prohibition Act, to manufacture articles such as toilet, medicinal and antiseptic preparations, containing intoxicating liquor but unfit for beverage purposes, is not within the provision of § 6 that “permits to manufacture, prescribe, sell or transport liquor . . . shall expire on the 31st day of December next succeeding the issuance thereof.” P. 606.
2
Such a basic permit issued under § 4, to be in force until “ revoked, suspended or renewed as provided by law or regulations,” suffi- ciently complies with the provision of § 6 (assuming but not deciding it to be applicable,) that every permit shall designate the time when the permitted acts may be performed. P. 608.
3
Such a basic permit issued under § 4 to remain in force “until revoked, suspended or renewed as provided by law or regulations,” is not subject to be revoked by a subsequent regulation fixing a time limit for unexpired permits, but is revocable only for cause as provided in §§ 5 and 9, upon notice and hearing, with a right to judicial review. P. 609.
Argument for Petitioner.. 281 U.S.
4. Regulations issued under a statute may not extend or modify its provisions. P. 610. 34 F. (2d) 642, affirmed.
Certior ari , 280 U. S. 548, to review decrees of the Circuit Court of Appeals affirming decrees of injunction in two suits against a Prohibition Administrator, the Commissioner of Prohibition, and the Secretary of the Treasury to restrain the revocation of permits issued to the plaintiffs under § 4 of the Prohibition Act.
Assistant Attorney General Youngquist, with whom Attorney General Mitchell, Messrs. Mahlon D. Kiefer and John H. McEvers were on the brief, for petitioner.
Permits to manufacture 11 liquor ” may be issued for one year, but they expire by operation of law “ on the 31st day of December next succeeding the issuance thereof.” (§6, Title II, National Prohibition Act.) At the time of being manufactured and before being prepared for the market, denatured alcohol and medicinal preparations containing more than one-half of one per cent, of alcohol by volume are 11 liquor ” within the meaning of § 6. Permits to manufacture denatured alcohol and medicinal preparations are therefore permits to manufacture “liquor,” and expire by operation of law 11 on the 31st day of December next succeeding the issuance thereof.” Higgins n . Foster, 12 F. (2d) 646; Cywan v. Blair, 16 F. (2d) 279; Chicago Grain Products Co. v. Mellon, 14 F. (2d) 362; United States v. Woodward, 256 U. S. 632.
If permits to manufacture denatured alcohol and medicinal preparations be not permits to manufacture “liquor,” nevertheless every permit which the Commissioner is authorized to issue must “ designate and limit the acts that are permitted and the time when and place where such acts may be performed.” § 6, Title II. When p. 601Congress used the words “designate” and “limit” it meant a definite designation and a definite limitation. Accordingly, a permit having an indefinite time limitation was unauthorized. Regulations 2 and 3 brought the practice into accord with the statute and are therefore valid. See Higgins v. Mills, 22 F. (2d) 913. Driscoll v. Campbell, 33 F. (2d) 281; Lewellyn v. Harbison, 31 F. (2d) 740; Chicago Grain Products Co. v. Mellon, 14 F. (2d) 362; Yudelson v. Andrews, 25 F. (2d) 80.
If Congress did not provide for the termination of § 4 permits on definite dates, it left the matter open to control by regulations to be issued from time to time. The exercise of a delegated power is not to be once used and forever lost. The administrative officers, acting in a field inherently subject to police regulations, could not bargain away the rights of the public in such manner as to preclude the future exercise of the powers delegated. Section 9, Title II, of the National Prohibition Act has reference to functions judicial in their nature conferred on the administrative officers; to inquiries as to whether an individual permit should be revoked. It in no way relates to the delegated quasi-legislative power to establish regulations.
Mr. John Fletcher Caskey argued the cause and submitted a brief for respondents, and Mr. Charles Dickerman Williams also submitted a brief for respondents.
Mr . Just ice Brandeis delivered the opinion of the Court.
These cases deal with the power of the Commissioner of Prohibition to revoke basic permits to use intoxicating liquors in the manufacture of medicinal preparations. Section 6 of the National Prohibition Act, October 28, 1919, c. 85, Title II, 41 Stat. 305, 310, declares: “ No one shall manufacture, sell, purchase, transport, or prescribe p. 602any liquor without first obtaining a permit from the commissioner so to do. . . . All permits to manufacture, prescribe, sell, or transport liquor may be issued for one year, and shall expire on the 31st day of December next succeeding the issuance thereof: Provided, . . . That permits to purchase liquor for the purpose of manufacturing or selling as provided in this Act shall not be in force to exceed ninety days from the day of issuance.”
Section 4 of the Act provides that the “ articles ” therein enumerated, including toilet, medicinal and antiseptic preparations, although containing intoxicating liquor, “ shall not, after having been manufactured and prepared for the market, be subject to the provisions of ” the Act; and that the use of intoxicating liquor in the manufacture of such 11 articles ” is authorized under certain restrictions. Manufacturers are required under this section to procure two permits: one, the basic permit here involved, granting general authority to manufacture such preparations with an alcoholic content; the other, a supplemental permit granting special authority to purchase liquor for that purpose and limited by § 6 to not more than ninety days from the date of issuance. Treasury Dept., Bureau of Internal Revenue, Regulations 60, (1924), §§200, 201, 221, 403; Prohibition Bureau, Regulations 2, (1927) §§ 201, 203, 404.
Section 5 of the Act prescribes that, upon due notice and hearing, the Commissioner of Internal Revenue (after Act of March 3, 1927, c. 348, 44 Stat. 1381, the Commissioner of Prohibition) may revoke permits granted under § 4 for failure to conform the manufactured “ articles ” with the “ descriptions and limitations ” of that section; and gives to the manufacturer the right to have the action of the Commissioner reviewed “ by appropriate proceeding in a court of equity.” Section 9 provides that, upon due notice and hearing, the Commissioner may revoke the permit of “ any person who has a permit ” and who p. 603a is not in good faith conforming to the provisions of this Act, or has violated the laws of any State relating to intoxicating liquor ”; and subjects the action of the Commissioner to judicial review as provided in § 5. Compare Ma-King Products Co. v. Blair, 271 U. S. 479.
For some years prior to October 1, 1927, the plaintiffs in these two cases had been engaged in the business of manufacturing medicinal preparations and held basic permits issued under § 4 of the Act. Each permit authorizes the use of whiskey in the manufacture of a particular product in accordance with a special formula ; was issued pursuant to regulations in force at the time of issuance; and declares that it shall remain in force “ until revoked, suspended or renewed as provided by law or regulations.”1 On September 2, 1927, the Treasury Department, Bureau of Prohibition, issued Regulations 2, effective October 1, 1927, in which it is provided by § 218 that “ all permits issued and in force and effect on the effective date of these regulations shall expire on December 31, 1928, unless renewed in the manner hereinafter specified . . .” and that thenceforth only annual permits shall be issued.2 The provision was made p. 604applicable to the basic permits issued under § 4 of the Act to persons engaged in the business of manufacturing medicinal preparations “ that are unfit for use for beverage purposes.” The plaintiffs, without indicating any intention to waive their rights under existing permits and for the purpose of safeguarding themselves, accordingly filed applications for renewal of their permits.
1
The permits provide also: “ If this permit requires a supporting bond, the failure to keep such bond in force will ipso jacto suspend this permit; and this permit may be revoked, suspended, modified, amended, supplemented, extended, or renewed in the manner and for the causes set forth in regulations 60, or specifically set forth herein, or agreed to by the permittee, or otherwise provided by law.”
2
The original regulations issued by the Bureau of Internal Revenue under Title II of the Act, called Regulations 60, effective January 17, 1920, provided in § 18 for permits of annual duration only. On March 14, 1924, Regulations 60 were revised and § 260 provided that all basic permits should be of annual duration; but that type “ H ” permits, to use liquor in the manufacture of articles “unfit for use for beverage purposes,” which are the permits held by these plaintiffs, should be valid “ so long as the supporting bond required by these regulations remains in full force and effect, or until canceled, suspended, revoked, or voluntarily surrendered by the permittee.” Inissued. See also T. D. 3774. The decision was declared void on June 1, 1926, by the United States Circuit Court of Appeals for the Second Circuit in Higgins v. Foster, 12 F. (2d) 646. Thereupon, the Bureau, by T. D. 3925, approved on September 1, 1926, declared that “ H ” permits would be deemed valid until surrendered or revoked. But, on November 9, 1926, the United States Circuit Court of Appeals for the Seventh Circuit held in Chicago Grain Products Co. v. Mellon, 14 F. (2d) 362, that a permit to manufacture denatured alcohol was subject to the one year limitation prescribed by § 6 of the Act. Thereafter, § 218 here in question was incorporated in Regulations 2, revising Regulations 60.
On December 1, 1928, the Commissioner of Prohibition, having concluded that the use of whiskey by such permittees under § 4 was susceptible of grave abuse and that proper supervision of manufacturing operations involving the use of whiskey could not be maintained by the inspection force, instructed all federal prohibition administrators to grant hearings to applicants for renewal of such permits for the purpose of determining whether or not whiskey is a necessary ingredient in the articles produced by them; to afford them an opportunity to present such evidence as they could to establish that alcohol dr other spirits would not properly serve for extraction and solution of the ingredients contained in their products and for the preservation thereof; and to deny permits for the use of whiskey after December 31, 1928, unless its indispensability was clearly demonstrated. The Federal Administrator for the district, acting on these instructions,
ternal Revenue Treasury Decision 3773, made on November 14, 1925, anounced that all permits theretofore granted would expire on December 21, 1925, and that thereafter only annual permits would be p. 605notified the several plaintiffs accordingly and fixed dates for their hearings. Compare Liscio n . Campbell, 34 F. (2d) 646.
These suits were then brought by the permittees in the federal court for southern New York, against the Prohibition Administrator,' the Commissioner of Prohibition and the Secretary of the Treasury to enjoin them from enforcing § 218 of Regulations 2; from proceeding with the proposed hearings concerning the use of whiskey; and from otherwise interfering with the permits held by them. The plaintiffs alleged that their permits contained no date of expiration and had never been revoked, cancelled or surrendered; that they were entitled to have their permits remain in force until they should be revoked pursuant to proceedings under §§ 5 and 9, and that no proceeding for such revocation had been brought. They charged that insofar as Regulations 2 purported to revoke, limit or suspend, without the hearing provided for in §§ 5 and 9, permits theretofore granted to the plaintiffs, it is void as in violation of the Act; that the proposed hearings are without legal warrant; and that the threatened action of denying the further use of whiskey is unauthorized and illegal. The trial court granted an injunction in each case.3 The decrees were affirmed by the United States Circuit Court of Appeals for the Second Circuit.4 Lion p. 606Laboratories, Inc. v. Campbell, 34 F. (2d) 642. This Court granted writs of certiorari. 280 U. S. 548.
3
The injunctions granted were interlocutory only. As to two of the original plaintiffs, Lion Laboratories, Inc., and Max Daub, an order of dismissal was granted, because their permits had expired by the express terms contained therein. These two plaintiffs appealed to the Circuit Court of Appeals, where the dismissal was affirmed. But they are not parties in this Court. The Commissioner of Internal Revenue had been joined as defendant; but the Circuit Court of Appeals held he was not a proper party and the bills were dismissed as against him. The plaintiffs acquiesced in this holding.
4
In the Circuit Court of Appeals, the cases were presented by all parties as tests of the merits of the bills. That court, therefore, passed “the question whether it was proper to grant an injunction pendente lite at all,” saying: “If the bill rested upon section 9 of title 2, National Prohibition Act (27 U. S. C. A., § 21) certainly it was not; if it depended upon the general equity powers of the court, we do not decide whether the policy manifested in section 9 applies, when there has been no hearing before the commissioner, and when, as here, the revocation was by regulation (section 218, Regulation 2, October 1, 1927).” 34 F. (2d) 642, 643. In this Court, too, the decrees were treated as final decrees on the merits of the bills. The decision of the Circuit Court of Appeals on the merits is in accord with its prior decision in Higgins v. Foster, supra, note 2, and with Casper v. Doran, 30 F. (2d) 400 (D. C. E. D. Pa.) but is in direct conflict with the Chicago Grain Products case, supra, note 2, and also with Cywan v. Blair, 16 F. (2d) 279 (D. C. N. D. Ill.), which expressly refused to follow the Higgins case.
First. The Government contends that § 1, Title II, of the Act defines the word “ liquor ” as meaning not only the beverages specifically named but also any liquids “ containing one-half of 1 per centum or more of alcohol by volume which are fit for use for beverage purposes ”; that liquids which are not immediately fit for use as beverages are yet 11 fit for use for beverage purposes ” if they can be made potable by a simple process; that plaintiffs’ preparations are of that character;5 that they are expressly excluded from the Act only “ after having been manufactured and prepared for the market ”; that, p. 607at the time of manufacture and before preparation for the market, they fall within the term “ liquor ” as used in the Act; that permits to manufacture the 11 articles ” enumerated in § 4 of the Act are, therefore, permits to manufacture “liquor” within the meaning of the provision in § 6 that “ permits to manufacture, prescribe, sell, or transport liquor . . . shall expire on the 31st day of December next succeeding the issuance thereof ”; and that, although by their own terms the plaintiffs’ permits are to be in force “ until revoked, suspended or renewed as provided by law or regulations,” they have expired ere this by the operation of § 6. Cywan v. Blair, 16 F. (2d) 279; Chicago Grain Products Co. n . Mellon, 14 F. (2d) 362.®
5
The argument is that pure alcohol is not immediately fit. for beverage use; but.that it may be mediately fitted for that purpose by adding water. Alcohol is unquestionably liquor. It is therefore urged that the same is true of any liquid which, like alcohol, is immediately or mediately fit for use as a beverage and otherwise answers the definition of “ liquor.” Aside from the argument developed in the text, there are two short answers to this contention. First, alcehol is expressly included in the definition of “liquor” in § 1. No argument can, therefore, be based on the fact that pure alcohol is not immediately fit for use as a beverage. Second, there is no evidence whatever in the record that the plaintiffs’ preparations can mediately be fitted for that purpose by the simple process of adding water,—or by any other process.
We are of opinion that the quoted provision of § 6 is inapplicable to the permits held by the several plaintiffs. Whether or not the preparations manufactured by the plaintiffs are “ liquor ” while being manufactured and before they are prepared for the market is wholly immaterial. We are not here concerned with the nature of the preparations in their varying stages of development. Our concern is with the object of the permits. This object, and the permission granted, is not simply to manufacture varyingly unfinished products; but to manufacture specified articles containing whiskey, alcohol or other spirits. The products are, by § 4, called “ articles ” and are expressly excluded from the effect of the term “liquor.” Moreover, § 4 authorizes the issuance of permits for the use of whiskey, etc., in the manufacture of medicinal and p. 608other preparations only “ that are unfit for use for beverage purposes ”; while “ liquor ” is defined in § 1 as meaning liquids, in addition to those enumerated, “ which are fit for use for beverage purposes.” The two definitions are mutually exclusive. If the article to be manufactured is fit for use for beverage purposes, and therefore liquor, a permit under § 4 cannot be issued; and vice versa. By express and obvious enactment, therefore, the permits held by the plaintiffs are not permits to manufacture liquor and are not within the expiration limit prescribed by § 6.
6
It is unnecessary for us to consider in these cases whether future applicants for basic permits under § 4 may insist on the grant of permits containing no calendar date of expiration; or whether future permits may properly restrict the use of whiskey only to cases where whiskey is an absolutely necessary ingredient and no other spirits or alcohol will properly serve for the extraction and solution of ingredients contained in the preparations and for the proper preservation thereof.
Second. The Government contends also that because plaintiffs’ permits, whatever their character, do not provide a calendar date of expiration, they are void or voidable for failure to comply with the further provision of § 6 that every permit 11 shall designate and limit the acts that are permitted and the time when and the place where such acts may be performed,” even though they complied with the regulations in force at the time of issuance. This contention rests wholly upon the assertion that the grant of a permit to be in force until “ revoked, suspended or renewed as provided by law or regulation ” is not definite.
It has been questioned whether Congress intended to make this provision apply to permits issued under § 4; but we do not express any opinion on that question. Even if applicable, this provision in § 6 does not declare that permits must expire by the calendar. The limitation that the permits shall be in force until revoked, suspended or renewed in accordance with the law or regulations is a sufficient compliance with the general requirement of the designation of the time when the permitted acts may be performed. When a calendar date is required § 6 so states specifically. Ninety days for permits to purchase liquor for the purpose of manufacturing and selling; thirty days for permits to purchase for any other purpose; December 31st next succeeding the date of issuance for permits to manufacture, prescribe, sell or transport liquor.
It is true, that permits for short periods terminating upon definite dates would leave the Bureau much freer in the exercise of its discretion than it could be under indeterminate permits revocable only for cause, established pursuant to §§ 5 or 9. Every permittee applying for a renewal has the burden of establishing his fitness;—whereas, if permits are terminable only by revocation pursuant to the provisions in §§ 5 and 9 the burden to justify closing the business because of some violation of the Act or of the regulations is put upon the Government. But § 6, as well as the rest of the Act, draws an obvious distinction between the manufacture, etc., of intoxicating liquor and that of industrial alcohol and the preparations enumerated in § 4. The former is forbidden, except for certain specified purposes for which liquor is deemed necessary. The latter is ordinarily lawful; and it is the express purpose of the Act to encourage it. United States v. Katz, 271 U. S. 354, 359. Regulations are imposed only for the purpose of guarding against the diversion of this lawful business into the unlawful business of supplying intoxicating liquor.7 It is entirely consistent with th«? avowed purposes of the Act, that the restrictions on the one business should be more severe than those on the other.
Third. Finally, the Government contends that even if Congress did not provide for the termination on some definite date of permits issued under § 4, it left the matter continuously open to control by regulations to be issued from time to time; that §§ 5 and 9 are not limitations upon this quasi-legislative police power; that the express provisions of the permits cannot have the effect of bargaining away such later exercise of that power as may be deemed appropriate; and that the regulation of
7
Compare “ Industrial Alcohol,” a monograph issued by the Treasury Department, Bureau of Prohibition (Gov’t Ptg. Office, 1930). 98234°—30----- 39
Syllabus. 281 U. S.
October 1, 1927, is a valid exercise of that power. This contention, also, is unsound.
The limits of the power to issue regulations are well settled. International Ry. Co. v. Davidson, 257 U. S. 506, 514. They may not extend a statute or modify its provisions. The regulation of October 1, 1927, purports to revoke unexpired permits as of December 31, 1928, without resort to the proceedings prescribed by §§ 5 and 9. It thus attempts to deprive permittees of rights secured to them by these sections of the Act. As was said in Higgins v. Foster, 12 F. (2d) 646, 648: “We cannot see that the Commissioner, under the guise of legislation, may do in gross what he had no power to do in detail.” Whether or not the power to make regulations, or the provision in § 6, authorizes the Bureau to fix expiration dates for permits when issued, it does not authorize the revocation of existing permits in violation of the express provisions of the Act.
Affirmed.
CAMPBELL, FEDERAL PROHIBITION ADMINISTRATOR, et al . v. W. H. LONG & COMPANY, INCORPORATED.
WYNNE, FEDERAL PROHIBITION ADMINISTRATOR, et al . v. SWANSON CHEMICAL CORPORATION.
DORAN, PROHIBITION COMMISSIONER, v. CASPER.
CERTIORARI TO AND CERTIFICATES FROM THE CIRCUIT COURTS OF APPEALS FOR THE SECOND AND THIRD CIRCUITS, RESPECTIVELY.
Nos. 445, 510 and 511. Argued April 25, 1930.—Decided May 26, 1930.
1
A permit to manufacture denatured alcohol under the Prohibition Act, (§4, Title II, § 10, Title III,) is not a permit to manufacture 1 “ Completely denatured alcohol is alcohol which has been denatured by a limited number of fixed formulae, for sale to the general public with very little supervision. Specially denatured alcohol is alcohol which is not as completely denatured as the * completely,’ and can only be obtained under a heavy bond for use in manufacturing processes in which the alcohol is always protected by the bond.”—Treasury Dept., Internal • Revenue Regulations 61, Jan. 31, 1920 (T. D. 2986), Art. 92. “ Specially denatured alcohol is ethyl alcohol so treated with denaturants as to permit its use in a greater number of specialized arts and industries than completely denatured alcohol.” Regulations 61, revised July 1925, Art. 88.
610 Argument for Campbell et al.
“liquor,” within the meaning of §§ 1 and 6, Title II, the latter of which provides that permits to manufacture “liquor” may be issued for only one year. P. 615.
2. A provision in a permit that it shall be in force until surrendered by the holder or canceled by the Commissioner of Internal Revenue for violation of the National Prohibition Act or regulations made pursuant thereto complies with the requirement of § 6, Title II of the Act, that every permit. “ shall designate and limit the . . . time when ” the authorized acts may be performed. Id.
3. A permit to operate a denaturing plant, which permit provides that it shall be in force until surrendered by the holder or canceled by the Commissioner of Internal Revenue for violation of the National Prohibition Act or regulations made pursuant thereto, may not be terminated by a general regulation providing that all such permits shall expire on a date named. Id.
4. A permit to use specially denatured alcohol in the manufacture of toilet preparations, which provides that it shall be in effect until surrendered by the holder or canceled by the Commissioner of Internal Revenue for violation of the provisions of Title III of the National Prohibition Act or the regulations made pursuant thereto, may not be terminated by a general regulation providing that all such permits shall expire on a date named. P. 617.
34 F. (2d) 645, affirmed.
Certified questions answered.
These cases are like those dealt with in the opinion on p. 599, ante. The first of them came here by certiorari to review a decree affirming an injunction. In the other two, decrees of the District Court granting injunctions, 30 F. (2d) 400, were appealed to the Circuit Court of Appeals, which sent up questions by certificate.
Assistant Attorney General Youngquist, with whom Attorney General Mitchell, Messrs. Mahlon D. Kiefer and John H. McEvers were on the brief, for Campbell, Wynne, and Doran.
A permit to use specially denatured alcohol is to be distinguished from a permit to use liquor. The manufacture and use of liquor is governed by the statutory p. 612permit system. The manufacture of denatured alcohol requires the use of alcohol and is therefore also governed by the statutory permit system. Denatured alcohol, however, after having been manufactured and prepared for the market (for use) is expressly excluded from the provisions of the National Prohibition Act and is not to be treated as liquor. The use of denatured alcohol, and its alcoholic content, tax free, is controlled entirely by regulations. Permits may or may not be required. Having the authority to require permits, the administrative officers have the authority to provide for their revocation. Revocations are governed by regulations, and not by statute. Section 9 of Title II relates to the revocation of statutory permits. It has no relation to permits required solely by regulations. The power to issue regulations includes the power to repeal, amend, or modify such regulations. The promulgation of Article 113 of Regulations 3 was a valid exercise of that power.
If, however, it be held that § 9 of Title II applies to the revocation of a permit to use denatured alcohol, § 6 of Title II likewise has application.
Mr. Lewis Landes submitted for W. H. Long & Company.
Mr. Harry S. Barger submitted and Mr. Michael Serody was on the brief for Swanson Chemical Corporation.
Mr. Patrick J. Friel submitted for Casper.
Mr . Justice Brand eis delivered the opinion of the Court.
In Nos. 445 and 510, the permits involved authorize the operation of denaturing plants, the purchase and receipt of alcohol thereat, and the removal therefrom of the denatured alcohol. In No. 511, the permit authorizes the use of specially denatured alcohol1 in the manufacture of toilet preparations.2 In each of the three cases the permit was issued prior to October 1, 1927, and was in accordance with the regulations in force at the date of issuance.3 Each permit provides in terms that it shall be in force “ from the date hereof until surrendered by the holder or cancelled by the Commissioner of Internal p. 614Revenue for violation of the national prohibition act4 or regulations made pursuant thereto.”
2
As in Nos. 443 and 444, two permits are required from the plaintiffs in these cases. One, the basic permit conferring general authority to engage in the business; the other, a supplemental permit, issued from time to time, granting authority for specific withdrawals of alcohol or specially denatured alcohol. Only the basic permits are here involved.
3
The first regulations promulgated under the Prohibition Act, Regulations 61, January 31, 1920, provided that permits to operate denaturing plants and permits to use specially denatured alcohol in manufacture should “ remain in force until voluntarily surrendered or cancelled.”—Articles 97 and 115. These provisions were continued in Articles 93 and 111 of Regulations 61, revised July 1925. These Regulations were superseded by Regulations 3, discussed in the text.
While the permits of the several plaintiffs were still in force, the Treasury Department, Bureau of Prohibition, promulgated Regulations 3, effective October 1, 1927. Article 95 thereof provides that all basic permits theretofore issued to operate denaturing plants and manufacture denatured alcohol shall expire on December 31, 1928, unless renewed; and that thereafter only annual permits shall be issued. Article 113 makes the same provision for permits to use specially denatured alcohol in the manufacture of toilet and other preparations. The plaintiffs, insisting on the effectiveness of their original permits, filed applications for renewal, which were denied. These suits were then brought to enjoin interference with their permits otherwise than in accordance with the provisions of § 9 of the Act, considered in the Galeno case. In No. 445 an injunction was issued by the trial court; the decree was affirmed by the Circuit Court of Appeals for the Second Circuit, 34 F. (2d) 645; and we granted certiorari, 280 U. S. 548. Injunctions were granted by the trial court also in Nos. 510 and 511, 30 F. (2d) 4008; appeals were taken to the Circuit Court of Appeals for the Third Circuit; and these cases are here on certificates from that court.
Among the “ articles ” enumerated in § 4, Title II, of the National Prohibition Act, (Oct. 28, 1919, c. 85, 41 Stat. 305, 309), which may be manufactured with the use of liquor, under permits, and which are excepted from operation of the act “ after having been manufactured and prepared for the market,” are: “(a) Denatured p. 615alcohol . . . produced and used as provided by laws and regulations now or hereafter in force. . . . (d) Toilet . . . preparations and solutions that are unfit for use for beverage purposes.” Title III, headed 11 Industrial Alcohol ” provides, in § 10: “Upon the filing of application and bond and issuance of permit, denaturing plants may be established . . . and shall be used exclusively for the denaturation of alcohol by the admixture of such denaturing materials as shall render the alcohol, or any compound in which it is authorized to be used, unfit for use as an intoxicating beverage. Alcohol lawfully denatured may, under regulations be sold free of tax either for domestic use or for export.” There is no provision in the Act specifically requiring permits for the manufacture of toilet preparations with denatured alcohol.
4
The permit in No. 511 reads: “for violation of the provisions of Title III of the national ” etc.
5
The District Court’s opinion in No. 510 is not yet reported. The case was heard by the court together with No. 511 and was disposed of on the same grounds as No. 511. [Since reported, 41 F. (2d) 784.]
First. The contentions of the Government in Nos. 445 and 510 are those already considered in Campbell v. Galena Chemical Co., supra. The questions certified in No. 510 are:
“ 1. Is denatured alcohol, during its manufacture and preparation for the market, ‘ liquor ’ within the meaning of sections 1 and 6, Title II, of the national prohibition act, the latter of which provides that permits to manufacture ‘ liquor ’ may be issued for only one year?
“2. Does the provision of section 6, Title II, of the national prohibition act, which directs that every permit ‘shall designate and limit the . . . time when’ the authorized acts may be performed, apply to a permit to operate a denaturing plant, i. e., to use alcohol in the manufacture of denatured alcohol?
“3. Does a provision in a permit that it shall be in force until ‘ surrendered by the holder or canceled by the Commissioner of Internal Revenue for violation of the national prohibition act or regulations made pursuant thereto,’ comply with the above-mentioned requirement of section 6 of Title II of the national prohibition act, that p. 616every permit c shall designate and limit the . . . time when ’ the authorized acts may be performed?
“ 4. May a permit to operate a denaturing plant, which permit provides that it shall be in force ‘until surrendered by the holder or canceled by the Commissioner of Internal Revenue for violation of the national prohibition act or regulations made pursuant thereto,’ be terminated by a general regulation, providing that all such permits shall expire on a date named? ”
We interpret the first question as inquiring whether a permit to manufacture denatured alcohol is a permit to manufacture liquor within the cited provision of § 6.6 As thus construed, we answer it in the negative. For, whether issued under § 4, Title II or under § 10, Title III, the permits held by plaintiffs authorize them to convert something which is undoubtedly liquor into a product which is required to be unfit for use as a beverage; that is, to convert liquor into something which is not liquor.7 Campbell v. Galena Chemical Co., supra. For p. 617the reasons stated in that case, our answer to the third question is in the affirmative; and to the fourth question in the negative. In view of the answer to the third question, the second question need not be answered.
6
If read literally, the first question is irrelevant to a decision and need not be answered. For, calling the solution “ liquor ” during its manufacture and preparation for the market—that is, before it is fully denatured and becomes the “ article,” denatured alcohol—does not aid in determining whether or not a permit to operate a denaturing plant and manufacture denatured alcohol is a permit “ to manufacture . . . liquor.” The character of the permit is determined, not by the nature of the solution in the process of manufacture, but by the character of the finished article authorized to be produced.
7
We are not told what denaturants plaintiffs use; but we are asked to take judicial notice that denatured alcohol may be fitted for beverage purposes by extracting the denaturant. We may also take judicial notice that some denaturants cannot be successfully extracted; and that any denaturant must be “ such that it can not be removed from the mixture and the treated product made fit for beverage purposes without great difficulty.” See “ Industrial Alcohol,” a monograph issued by . the Treasury Dept., Bureau of Prohibition, p. 4 (Gov’t Ptg. Office, 1930). Moreover, from the standpoint of caution, denatured alcohol, however treated, is not fit for beverage purposes.
Second. In No. 511, the Circuit Court of Appeals certified the following questions:
“ 1. Does the provision of section 6, Title II, of the national prohibition act, which directs that every permit ‘ shall designate and limit the . . . time when ’ the authorized acts may be performed, apply to a permit to use specially denatured alcohol?
“2. (Same as question 3 in No. 510).8
“ 3. May a permit to use specially denatured alcohol in the manufacture of toilet preparations, which permit provides that it shall ‘be in effect until surrendered by the holder or cancelled by the Commissioner of Internal Revenue for violation of the provisions of Title III of the national prohibition act or the regulations made pursuant thereto/ be terminated by a general regulation providing that all such permits shall expire on a date named? ”
In this Court, the Government concedes that the permit here involved is not one to manufacture liquor within the meaning of either the special or the general time provisions of § 6. It contends, however, that since toilet preparations and denatured alcohol used in their manufacture are both excluded by § 4 from the operation of the Act, the plaintiff’s business is not one for which a permit is required by the statute; that if the plaintiff used so-called completely denatured alcohol, no permit would be required at all, Regulations 61 (1920), Art. 108; Regulations 3 (1927), Art. 106; that permits for the use of specially denatured alcohol are required only by the regulations of the Bureau pursuant to its general authority, conferred, among other sections, by § 13, Title III, to p. 618make regulations to guard against the diversion of alcohol for unlawful purposes and to protect the public revenue; that the power to issue regulations includes the power to repeal and amend them; that § 9, Title II, applies only to the permits required by statute and does not abridge the regulatory power with respect to permits required only by administrative regulation. The conclusion is, in our opinion, unsound.
8
Except for the slight variation in the language of the permit mentioned in note 1, supra, and quoted in the third question.
Since no question has been raised as to the propriety of plaintiff’s permit, we do not inquire whether the permit is required by the Act or whether its requirement by regulations is authorized thereby. But, if the requirement of the permit is proper, it is so only because it is authorized by the Act, either explicitly or otherwise. There is no suggestion that the regulations were made under any other authority. If, then, the permit was issued under authority of the Prohibition Act, the plaintiff comes within the description in § 9 of “ any person who has a permit ” ; and that section provides the exclusive procedure for the revocation of the permit. The attempt to revoke it by regulations without complying with that section exceeds the authority, and violates rights, conferred by the Act.9 p. 619610 Syllabus.
9
The Government urges that under Act of October 3, 1913, c. 16, Section IV, N, subsec. 2, 38 Stat. 114, 199 and Act of June 7, 1906, c. 3047, 34 Stat. 217 (U. S. C., Tit. 26, §§ 481-487), the requirement of permits for the manufacture and denaturation of alcohol tax free, in special cases, was governed entirely by regulations; that permits under the regulations made pursuant to those Acts were limited to specific amounts of alcohol (Regulations 30,, Art. 60, 61, 77-90) ; that §§ 10 and 11, Title III of the Act treat of similar subjects; and that the Prohibition Act, as shown by the report of the House Judiciary Committee (H. R. Report No. 91, 66th Cong., 1st sess., p. 2) purports to continue the policy of the prior Acts and regulations. There is a decisive difference between the Prohibition Act and those statutes. The latter are silent on the whole subject of permits; the former specifically provides how permits should be revoked. Moreover, the plaintiffs in Nos. 443 and 444, 1. After entry of a plea of nolo contendere to an indictment charging conspiracy unlawfully to transport intoxicating liquors in violation of the National Prohibition Act, a stipulation of facts filed by a relying on the same and even more specific portions of the House Committee report referring to the Lever Act, August 10, 1918, c. 53, §§ 15 and 16, 40 Stat. 276, 282, the Revenue Act of 1918, February 24, 1919, c. 18, 40 Stat. 1057, 1105^16, and Internal Revenue T. D. 2788, make quite as cogent an argument for a contrary conclusion. We need not consider the merits of either argument. For, we are of opinion that § 9 is applicable to the permits involved in all these cases. There is no need to seek light from debatable inferences from a general statement in the Committee report. The Government also points out that, aside from the decisions in Nos. 443, 444, 445 and 510, its contentions in No. 511 are of great importance to the administrative officers in promulgating regulations governing the use of specially denatured alcohol. Our decision merely denies the power to revoke unexpired permits in a way other than that prescribed in the Act. As in Nos. 443 and 445, we refrain from deciding whether or not the Regulations are effective as to future applicants for permits.
We answer the third question in the negative. For reasons stated in connection with questions 2 and 3 in No. 510, we answer the second question in the affirmative; and do not answer the first.
No. ^5—Affirmed.
No. 510—Question 1 answered No.
Question 2 not answered. Question 3 answered Yes. Question 4 answered No. No. 511—Question 1 not answered.
Question 2 answered Yes. Question 3 answered No.