1. A manufacturer of fermented liquors, from whom taxes had been
collected under a second assessment, was, in order to recover them,
required by the Act of July 13, 1866, 14 Stat. 111, Rev.Stat., sec.
3225, to show that his return did not contain any understatements,
and he should therefore prove that it agreed with the quantity of
liquor actually drawn from the fermenting vessels.
2. For that purpose, although not, under all circumstances,
necessarily conclusive for or against the government, his books, if
kept as the law requires, ought to be the best evidence, and until
it is shown that they cannot be produced or do not contain the
desired information, resort cannot be had to the recollection or
knowledge of witnesses as to circumstances bearing upon the
ultimate fact in issue.
3.
Quaere does the act entitled "An Act to define the
tax on fermented or malt liquors," approved May 13, 1876, 19 Stat.
53, change any rule of evidence theretofore established.
On the 22d of January, 1874, the Commissioner of Internal
Revenue, acting under the authority of sec. 2 of "An Act for the
reduction of officers and expenses of the internal revenue,"
approved Dec. 24, 1872, 17 Stat. 402, Rev.Stat. 3182, assessed a
tax of $1,350 on Bergdoll & Psotta, the plaintiffs, for "one
thousand three hundred and fifty barrels of beer sold and removed,
& c., without proper stamps, to Oct. 1, 1873." This assessment
having been duly certified to the collector, the tax was paid upon
compulsion and under protest. An appeal was then made to the
commissioner, under the act of 1864, sec. 44, 13 Stat. 239, as
amended in 1866, 14 Stat. 111, Rev.Stat., sec. 3226, to refund the
amount paid, which being denied, this action was brought against
Pollock, the collector, to recover back the money.
Upon the trial, the plaintiffs offered to prove by witnesses on
the stand that, from the date at which the internal revenue act of
1866 went into effect, until the assessment complained of was
made,
"no beer was sold or removed from their brewery for consumption
or sale except in barrels or parts of barrels, which were all duly
stamped with an internal revenue stamp, . . . as required by the
act of Congress;"
that they
"had made their monthly returns to the collector regularly until
and
Page 95 U. S. 338
including the month of December, 1873; that there was no
understatement or undervaluation in either of said returns of the
quantity of beer brewed, or of beer sold or removed from their
brewery for consumption or sale, and that neither of the returns
was false or fraudulent."
This testimony was excluded by the court, and exceptions taken.
Judgment having been rendered against the plaintiffs, they sued out
this writ of error.
The errors relied upon are: 1. that the assessment is
insufficient in law, because too indefinite and uncertain; and, 2.
that the testimony offered was improperly rejected.
MR. CHIEF JUSTICE WAITE delivered the opinion of the Court.
The record presents only the exceptions to the exclusion of the
testimony. The objection that the assessment is insufficient in
law, because too indefinite and uncertain, cannot be considered
here, as it does not appear to have been taken below.
The acts under which the tax was assessed -- 17 Stat. 402, sec.
2; 14 Stat. 104, sec. 9, amending sec. 20 of act of 1864;
Rev.Stat., sec. 3182 -- make it the duty of the Commissioner of
Internal Revenue, in any case where upon inquiry it shall be
ascertained that any list which has been delivered to a collector
is imperfect or incomplete, in consequence of any omission or
understatement or undervaluation or false or fraudulent statement
contained in any return or returns made by any persons or parties
liable to tax, to enter upon any monthly or special list, at any
time within fifteen months after the delivery of such incomplete
list, the names of the persons or parties in respect to whose
returns there have been any omission, &c., together with the
amounts for which such persons or parties may be liable over and
above the amount assessed upon the return, and to certify the list
to the collector, to be proceeded with according to law. By sec. 44
of the act of 1864, 13 Stat. 239, as amended in 1866, 14 Stat. 111,
Rev.Stat., sec. 3225, it is provided that where a second assessment
has been made pursuant to this authority, such assessment shall not
be remitted, nor shall taxes collected under such assessment be
recovered, refunded, or paid
Page 95 U. S. 339
back, unless it is proved that the list, statement, or return
was not false or fraudulent, and did not contain any understatement
or undervaluation. This is a case of second assessment, and the
question presented is as to the manner in which a manufacturer of
fermented liquors may be permitted to prove that his returns did
not contain an understatement.
The "Act to reduce duties on imports and to reduce internal
taxes, and for other purposes," passed June 6, 1872, 17 Stat. 245,
as amended Dec. 24, 1872, 17 Stat. 401, sec. 1, provides in sec.
19, Rev.Stat., sec. 3337, that every manufacturer of fermented
liquors shall from day to day enter or cause to be entered, in a
book to be kept by him for that purpose, the estimated quantity
produced, in barrels, and the actual quantity sold or removed for
consumption or sale, in barrels, or fractional parts of barrels;
and shall also from day to day enter or cause to be entered, in a
separate book to be kept by him for that purpose an account of all
materials by him purchased for the purpose, of producing such
fermented liquors, including grain and malt, and render to the
collector of internal revenue for the district, on or before the
tenth day of each month, a true statement, in writing, taken from
his books, of the estimated quantity, in barrels, of such liquors
brewed and the actual quantity sold; and verify or cause to be
verified such statement and the facts therein set forth, by oath or
affirmation. These books are to be open at all times for the
inspection of the collector, deputy collector, inspector, or
revenue agent, who may take memorandums and transcripts therefrom.
Sec. 20 requires the verification of the entries made upon these
books by the oaths of the party making them and of the
manufacturer, on or before the 10th of each month.
The taxes are to be paid by stamps purchased from the collector
of the district and affixed to the packages. Sec. 23. In this way,
by a comparison of the returns with the account for stamps sold, a
collector can always tell whether the taxes upon the reported
production have been paid, and, by a comparison of the estimated
production with the actual production as returned and with the
quantity of material purchased, he can judge as to the probable
honesty of the returns. The entries in the books are intended to be
for the mutual protection
Page 95 U. S. 340
of the government and the manufacturer. As was said in
Dandelet v.
Smith, 18 Wall. 647,
"The exact truth always lies in the knowledge of the
manufacturer. His books show, or ought to show, every thing that he
has produced; and, in an investigation of this kind, if he shows
that his returns or stamps fully equal the amount of his
production, the burden will then be on the government to show a
deficiency."
An honest manufacturer who has kept accurate books has always at
hand the ready means of establishing the fact of his compliance
with the law.
His return is to be "a true statement, in writing, taken from
his books." To prove, therefore, the accuracy of his returns, he
has but to refer to his books. Parol testimony is only required for
the identification of the books. That being done, the books and the
returns speak for themselves. Nothing more is required except to
institute the necessary comparison. So too of the payment of the
tax. The law specifies the amount of the tax upon each package, and
the books show, or ought to show, the number of packages. The books
also show, or ought to show, the quantity of material purchased for
use. Experience has demonstrated what the ordinary production from
a given quantity of material is. If the production as shown by the
books differed from that which ordinarily would be the yield of the
material purchased, the burden, as the law then stood, was cast
upon the manufacturer after a reassessment to account for the
discrepancy. It is unnecessary now to decide whether this rule of
evidence has been changed by the "Act to define the tax on
fermented or malt liquors," passed May 13, 1876, 19 Stat. 53. The
proper mode of overcoming this burden is not by showing that no
packages have been removed without the requisite stamp, but by
proof of what was actually drawn from the fermenting vessels. The
reasonable presumption is that the production of one brewer will
not vary materially from the average of production of others
operating under similar circumstances and manufacturing a similar
article. If it does, an experienced manufacturer ought to be able
to account for the difference. For this purpose, his books, which
the law makes it his duty to keep, will, if kept as the law
requires, furnish the evidence of his daily transactions, and
enable him at once, when a deficiency appears,
Page 95 U. S. 341
to secure the evidence with which to make the necessary
explanation, should one be called for. It he produces a better
article by the use of a larger quantity of material, or has
sustained special losses in the process of manufacture, or
afterwards and before removal, or has sold a part of his material
without use, by having his attention called through his daily
entries to an apparent deficiency in his production, he can prepare
himself for defense against any charge which may grow out of it.
His books are not necessarily conclusive for or against the
government under all circumstances; but if properly kept, as they
must be to avoid the penalties of the law, they ought, so to speak,
to furnish the base from which his evidence must spring. If they do
not, it is his own fault, and he must suffer the consequences.
Certainly, the law does not contemplate that he may relieve himself
from the effect of insufficient or improper entries by a resort
primarily to the uncertain recollection or knowledge of witnesses
as to circumstances which in any event can have only a remote
bearing upon the ultimate fact to be established. We do not say
that, in the progress of a trial and under some circumstances, such
proof as was offered as to removals may not be competent; but we
are clearly of the opinion that no foundation was laid in this case
for its introduction. The books, with proper explanations in
respect to entries which appear in them, ought to constitute the
best evidence in the case; and until it is shown that they cannot
be produced, or that they do not contain the information required,
no evidence of such remote circumstances is admissible. In this
case, there was no attempt to account for the absence of the books,
or any claim of defective entries, and we think the court did not
err in excluding the testimony.
The other questions presented in the brief filed for the
government were not raised in the court below, and need not be
considered here.
Judgment affirmed.
