CARBON CORP v. BOWERS

Per Curiam.

It is not the function of this court to substitute its judgment for that of the Board of Tax Appeals on factual issues but only to determine from an examination of the entire record whether the decision reached by the board is unreasonable or unlawful.

From an examination of the entire record, this court is unable to find that the decision of the Board of Tax Appeals is unreasonable or unlawful. The decision is, therefore, affirmed.

Decision affirmed.

WEYGANDT, C. J. ZIMMERMAN, BELL and MATTHIAS, JJ., concur.

STEWART, J., dissents from the judgment in case No. 35045 and concurs in the judgment in case No. 35046.

TAFT and HERBERT, JJ., dissent.

ZIMMERMAN, J., concurring. In my view the dissenting opinion of Judge Taft herein deals too harshly with the disposition made of the instant cases by the majority of the court.

As concerns an appeal from the Board of Tax Appeals to the Supreme Court or the Court of Appeals, Section 5717.04, Revised Code, provides in part:

"The proceeding to obtain a reversal, vacation, or modification * * * shall be by appeal to the Supreme Court or the Court of Appeals * * *.

"* * *

"The board, upon written demand filed by an appellant, shall within 30 days after the filing of such demand file with the court to which the appeal is being taken a certified transcript of the record of the proceedings of the board pertaining to the decision complained of and the evidence considered by the board in making such decision.

"If upon hearing and consideration of such record and evidence the court decides that the decision of the board appealed from is reasonable and lawful it shall affirm the same, but if the court decides that such decision of the board is unreasonable or unlawful, the court shall reverse and vacate the decision or modify it and enter final judgment in accordance with such modification."

There is much force in the first paragraph of the per curiam opinion in the case of Standard Oil Co. v. Peck, Tax Commr., 163 Ohio St. 63, 65, 125 N.E.2d 342, 343, which reads:

"As is often the case in appeals from decisions of the Board of Tax Appeals, questions of fact are presented and those questions are close. It is not the function of this court to substitute its judgment for that of the board on factual issues but only to determine from an examination of the entire record whether the decision reached by the board is unreasonable or unlawful."

In order for the appellant corporation herein to prevail, it is incumbent on it to show that the findings made and conclusions reached by the board in its decision are unreasonable or unlawful.

Under Sections 5739.02 and 5741.02, Revised Code, every retail sale or use of tangible personal property in Ohio is presumed to be taxable, and the burden rests on the taxpayer to establish affirmatively his right to the exceptions claimed. Standard Oil Co. v. Peck, Tax Commr., supra.

To escape the imposition and payment of the tax on the equipment here in issue, the corporation must, under the requirements of Sections 5739.01 and 5741.01, Revised Code, prove that it is used or consumed directly in manufacturing or processing a product for sale.

Now, is the equipment here in issue used or consumed directly in manufacturing or processing a product for sale? That is a question of fact upon which reasonable minds may differ and have differed, as is demonstrated in these very cases. The Tax Commissioner took one view, the Board of Tax Appeals another, and the members of this court are not in agreement on the proposition. In a situation of this kind what is the duty of the court? According to the applicable statute the ultimate duty of the court is to decide whether the decision appealed from is reasonable and lawful or unreasonable or unlawful. In its endeavor to dispose of this matter and to avoid substituting its judgment for that of the board on questions of fact, the majority of this court, although the members of such majority differ in some respects with the board and even among themselves, has concluded that the decision of the board is not unreasonable or unlawful to the extent that a reversal or modification is required.

In arriving at such determination, there has been compliance with the provisions of the statute. Different cases coming to this court from the board on appeal call for different treatment. This is one of those instances in which a general determination that the decision of the board is not unreasonable or unlawful is warranted.

There is nothing novel or startling about the manner in which these cases have been decided. Similar dispositions have been made of orders of the Public Utilities Commission coming to this court on appeal. See Baltimore & Ohio Rd. Co. v. Public Utilities Commission, 156 Ohio St. 282, 102 N.E.2d 246; New York Central Rd. Co. v. Public Utilities Commission, 166 Ohio St. 113, 139 N.E.2d 623; and Southern Ry. System v. Public Utilities Commission, 166 Ohio St. 240, 141 N.E.2d 149.

In the dissenting opinion it obviously is sought to accomplish the very thing the law definitely does not permit, namely, the mere substitution of the judgment of this court for that of the Board of Tax Appeals on matters of mechanical detail.

WEYGANDT, C. J., BELL and MATTHISA, JJ., concur in the foregoing concurring opinion.

STEWART, J., dissenting and concurring. I dissent from the judgment in case No. 35045 and concur in the judgment in case No. 35046 for the reason that, in my opinion, the plant in question here is a completely integrated one.

TAFT, J., dissenting. The per curiam opinion in the instant case is a logical sequel to the per curiam opinion in Standard Oil Co. v. Peck, Tax Commr., 163 Ohio St. 63, 125 N.E.2d 342. It represents an almost complete abandonment by this court of its duty with respect to review of a decision of the Board of Tax Appeals, a duty imposed upon the court pursuant to the authority vested in the General Assembly by Section 2 of Article IV of the Constitution. A possible reason for such an abandonment is stated in the first paragraph of the opinion in Kelley Motors, Inc., v. Peck, Tax Commr., 161 Ohio St. 186, 118 N.E.2d 408. and that reason is perhaps emphasized by the very substantial number of questions presented in this case, as in Standard Oil Co. v. Peck, Tax Commr., supra.

My principal difficulties with the decision of the Board of Tax Appeals are with the apparent inconsistencies involved therein. For example, a use in lighting the production area would seem to be as direct a use "in the production of * * * property * * * by manufacturing" or "processing" (Sections 5739.01 and 5741.01, Revised Code) as the use of water to cool or air to activate parts of the production machinery. However, the Board of Tax Appeals' decision allows exemption with respect to transportation to the place of production for such water and air (but cf. Saunders Mills, Inc., v. Evatt, Tax Commr., 139 Ohio St. 227, 39 N.E.2d 526; Tri-State Asphalt Corp. v. Glander, Tax Commr., 152 Ohio St. 497, 90 N.E.2d 366; Jackson Iron & Steel Co. v. Glander, Tax Commr., 154 Ohio St. 369, 96 N.E.2d 21; W. E. Anderson & Sons Co. v. Glander, Tax Commr., 154 Ohio St. 561, 97 N.E.2d 29; Crowell-Collier Publishing Co. v. Glander, Tax Commr., 155 Ohio St. 511, 99 N.E.2d 649; National Tube Co. v. Glander, Tax Commr., 157 Ohio St. 407, 105 N.E.2d 648; American Compressed Steel Corp. v. Peck, Tax Commr., 160 Ohio St. 207, 115 N.E.2d 153; Powhatan Mining Co. v. Peck, Tax Commr., 160 Ohio St. 389, 116 N.E.2d 426; and General Motors Corp. v. Bowers, Tax Commr., 164 Ohio St. 574, 132 N.E.2d 213), although not with respect to any transportation (see General Motors v. Bowers, Tax Commr., supra) for the electricity used to light that place of production. Furthermore, it is obvious that an exemption can be recognized with respect to the electric generating equipment as something used "directly in the production of * * * property * * * by manufacturing" or "processing" only if such equipment is used in such production after it can legally be said that such production by manufacturing or processing has commenced. Thus, if it can be considered as so used (but see especially Jackson Iron & Steel Co. v. Glander, Tax Commr., supra), such generating equipment must necessarily represent something used after a beginning of such production by manufacturing or processing. Both the Tax Commissioner and the Board of Tax Appeals recognized and the taxpayer of course agrees that this generating equipment was so used. Also, the statement of facts herein indicates that the taxpayer "operates a completely integrated plant" and thereby apparently begins production with its generating equipment. Then, why is not the sale or use of something necessarily used between the steps in such production exempt, such as the wires used to carry current from the production of such electric power to the fixtures which light the production area and are admittedly used directly in such production by manufacturing or processing? (See Mead Corp. v. Glander, Tax Commr., 153 Ohio St. 539, 93 N.E.2d 19; Powhatan Mining Co. v. Peck, Tax Commr., supra; Dye Coal Co. v. Evatt, Tax Commr., 144 Ohio St. 233, 58 N.E.2d 653; and France Co. v. Evatt, Tax Commr., 143 Ohio St. 455, 55 N.E.2d 652.) Also, is not fuel used to run the power-producing part of the production by manufacturing or processing used as directly in such production as is compressed air used to run and water used merely to cool other parts of such production? If it is (see Terteling Bros. v. Glander, Tax Commr., 151 Ohio St. 236, 85 N.E.2d 379, and France Co. v. Evatt, Tax Commr., supra), how can the Board of Tax Appeals reasonably allow exemption with respect to things which merely provide transportation of such air and of such water to and of such water from the place of production and yet disallow exemption with respect to something which actually processes the fuel into a usable form at the time of its injection into the power-producing machinery, and also disallow exemption with respect to the ash receptacles which are a part of and essential to operation of that machinery?

Although I might find a reasonable basis for agreeing with some of the conclusions reached by the Board of Tax Appeals in this decision, such agreement and a reasonable desire for consistency in my conclusions and any recognition of previous decisions of this court would then necessarily require my disagreement with other conclusions reached in the decision of that board. Hence it is my conclusion that that decision is unreasonable and should be reversed, and the cause remanded for further consideration.

HERBERT, J., concurs in the foregoing dissenting opinion.