United States v. J. Leslie Morris Co.

This is an appeal by the government from a judgment for the refund of excise taxes. It involves the question whether sales of automobile connecting rods were taxable under § 606(c) of the Revenue Act of 1932, 26 U.S.C.A.Int.Rev.Code, § 3403 (c), imposing a tax upon automobile parts “sold by the manufacturer, producer, or importer” thereof.

The taxpayer was incorporated to “operate a business for the manufacture, sale and distribution of automotive and industrial bearing metals and products”. During the taxable period it was engaged in rebabbiting and otherwise processing, and selling, used or worn out automobile connect-, ing rods under the trade name “Moroloy”. It owned plants in various cities from New York to Los Angeles and was affiliated with other plants throughout the United States and Canada. Automobile wrecking brokers and jobbers were the chief source of supply for the used rods, and the sales —made on what is described as the exchange basis — were to wholesalers or jobbers, ultimately for replacement purposes in the repair of automobiles.

A connecting rod is a forging by means of which the automobile piston is connected with the crankshaft. It has a bearing at either…