McNicol and Anor v Pinch

[1906] 2 K.B. 352

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(Judgment by: Bray J (including background))

Between: McNicol and Anor
And: Pinch

Court:

Judges:
Bray JDarling J
Ridley J

Subject References:
REVENUE
Excise Licence
Manufacture of Saccharin
Prescribed Book

Legislative References:
Finance Act, 1901 (1 Edw. 7, c. 7) - s. 9
Revenue Act, 1903 (3 Edw. 7, c. 46) - s. 2
Regulations (No. 633 of Statutory Rules and Orders, 1904) -

Judgment date: 22 June 1906

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Judgment by:
Bray J (including background)

The "manufacture of saccharin" in the Finance Act, 1901, and the Revenue Act, 1903, means the "bringing into being as saccharin."

The appellants subjected certain "330 saccharin" (i.e., saccharin 330 times as sweet as sugar) to a chemical process, the result of which was that in some cases "550 saccharin" (i.e., saccharin 550 times as sweet as sugar) was produced, in others a mixture sweeter than 330, but not so sweet as 550 saccharin, and in a few cases a mixture less sweet than 330 saccharin:-

Held (per Bray and Darling JJ., Ridley J. dissenting), that the appellants were not manufacturing saccharin within the meaning of the Finance Act, 1901, so as to be compelled to take out the excise licence required by s. 9 of that Act and s. 2 of the Revenue Act, 1903, and to obtain from an officer of Inland Revenue a book such as is prescribed by the Regulation No. 633 of the Statutory Rules, 1904, inasmuch as the substance the appellants dealt with was always saccharin both before and after their treatment of it.

Case stated by a stipendiary magistrate for Manchester.

An information was preferred on July 22, 1905, by the respondent Luke Pinch, an officer of Inland Revenue, under s. 9 of the Finance Act, 1901, and s. 2 of the Revenue Act, 1903, against the appellants Joseph and John McNicol, for that they the appellants between May 20 and June 4, 1905, in the city of Manchester, did manufacture saccharin without having in force an excise licence for the purpose, contrary to the form of the said statutes and to the regulations made under them by the Commissioners of Inland Revenue. A second information was preferred by the respondent under the said statutes against the appellants for that the appellants before and at the time thereinafter mentioned were makers of saccharin at 3, Hanson's Court, in the city of Manchester, and that they, being such manufacturers as aforesaid, on June 3, 1905, in the city aforesaid, failed to obtain from an officer of Inland Revenue a book such as is prescribed by the Regulation No. 633 of the Statutory Rules of the year 1904, contrary to the form of the said statutes and to the regulations made under them by the Commissioners of Inland Revenue.

The magistrate convicted the appellants.

Upon the hearing of the informations the following facts were admitted or proved:-

(a)

That saccharin is a sweet substance produced from toluene sulphonamide.

(b)

That the appellants had not manufactured saccharin from toluene sulphonamide.

(c)

That in the production of saccharin certain compounds are produced called "para" compounds. If these are not eliminated in the early stages of the production, para saccharin, which has no sweetness, is produced as well as "ortho" or true saccharin. Where no elimination of para compounds takes place in the early stages of production the product is a mixture of approximately 60 per cent. of ortho saccharin with 40 per cent. para saccharin. This mixture is known commercially as "330 saccharin," and is estimated to be 330 times as sweet as sugar. If the para compounds are practically eliminated in the early stages of production, the product is a mixture of 95 per cent. (or more) of ortho saccharin with a very small percentage of para saccharin. Such a mixture is known commercially as "550 saccharin," and is estimated to be 550 times as sweet as sugar. If 330 saccharin is produced the para saccharin can afterwards be eliminated by a subsequent chemical process and 550 saccharin obtained.

(d)

The appellants subjected certain 330 saccharin to a chemical process. The amount of 330 saccharin treated was 5 lbs. purchased in Manchester, and 2 cwt. imported, upon all of which duty had been paid. This amount of 330 saccharin was not treated in one bulk, but in separate quantities. The result of this treatment was that in some cases 550 saccharin was produced, and in some cases a mixture sweeter than 330 saccharin, but not so sweet as 550 saccharin In a few cases the result was a mixture less sweet than 330 saccharin. Some of the saccharin which had undergone this treatment was sold by the appellants in the course of their business as dealers in saccharin.

(e)

That the appellants at the time they so treated the 330 saccharin had not in force an excise licence for the manufacture of saccharin as required by the regulations of the Commissioners of Inland Revenue made under s. 9 of the Finance Act, 1901, ^[F1] and s. 2 of the Revenue Act, 1903. ^[F2]

(f)

That the appellants had failed to obtain from an officer of Inland Revenue a book such as is prescribed by Regulation No. 633 of the Statutory Rules and Orders, 1904, ^[F3] made by the Commissioners of Inland Revenue under the statutes above mentioned.

The respondent contended that the provisions of the Finance Act, 1901, and the Revenue Act, 1903, as to saccharin and the regulations made under these Acts as to license and entry of premises were primarily provisions to enable the Revenue authorities to ascertain who was manufacturing saccharin and to confer on them the right to inspect the premises where the manufacture was carried on with a view to preventing frauds upon the Revenue, and that the licence to manufacture saccharin was not only required for a process of deriving saccharin from toluene sulphonamide by adding certain chemical substances to toluene or to sulphonamide but that it was also required for the chemical process mentioned above.

The appellants contended:-

(a)

That upon the facts admitted or proved there was no evidence that they had manufactured saccharin within the meaning of the said statutes and the said regulations made thereunder.

(b)

That the process of converting 330 saccharin into 550 saccharin was not a manufacture of saccharin within the meaning of the statutes and the regulations.

(c)

That the true construction of the term "manufacture" in the statutes and the regulations thereunder implied the assembling together of the constituent elements necessary to make saccharin and the employment of some process to combine them, and that as it was proved that the appellants had not brought the constituent elements of saccharin together, but had merely operated upon saccharin already in existence, their process of converting 330 saccharin into 550 saccharin was not a "manufacturing" of saccharin.

The magistrate was of opinion that the appellants, by treating 330 saccharin by the process above described, had manufactured saccharin within the meaning of the said statutes and the regulations made thereunder, and he thereupon convicted the appellants of the offences charged in the said informations.

The question for the opinion of the Court was whether upon the above statement of facts the magistrate came to a correct determination in point of law.

Lazarus Langdon, K.C., and W. Ambrose Jones, for the appellants. The appellants did not manufacture saccharin. What they did was to subject saccharin to certain processes. The amount of duty payable on the saccharin was unaltered. The treatment to which the saccharin was subjected is equivalent to refining whisky or sugar. After the process the saccharin still remained saccharin commercially. A person cannot be said to "manufacture" unless he starts with one substance and arrives at another. If he arrives at the end of his process with exactly the same thing as he started with he has not manufactured anything. The appellants merely treated saccharin; they cannot be described as manufacturers of it. The Explosives Act, 1875 (38 & 39 Vict. c. 17), contains a definition section, viz., s. 105. For the purposes of that Act the term "manufacturing" has an artificial meaning. But in the Act of 1901 there is no artificial meaning given to the word, and it is therefore used in its commercial sense. The statute was passed for the purpose of imposing a tax on traders. Commercially 330 saccharin and 550 saccharin are both saccharin. The statutes of 1901 and 1903 have to be construed by commercial men, and therefore the word "manufacture" must be understood in a commercial sense, i.e., where there is a transformation of one article into another commercially different.

Sir J. Lawson Walton, A.-G. and W. Finlay, for the respondent. The object of the statute was that persons carrying on a manufacturing process of this kind should be licensed so that the Crown should have certain rights of inspection. Substances not saccharin would, in order to be converted into saccharin, have to go through all the processes to which the 330 saccharin is submitted by the appellants. The real question is whether this manufacturing process can be carried on without being subject to inspection. It is not a question relating to the Revenue. It is important that this manufacturing process should be subject to clause 7 of the Regulation No. 633 of the Statutory Rules and Orders, 1904. There is no distinction between the meaning of saccharin "manufactured" and "made" in the Acts of 1901 and 1903. Saccharin is so easily disguised that it is impossible to frame regulations that will prevent the Revenue from being defrauded. A drawback may be allowed on saccharin under s. 9 of the Act of 1901, as extended by s. 2 of the Act of 1903.

It is true that there there is no name distinguishing 330 saccharin from 550 saccharin, but this is a mere question of terminology. The argument on behalf of the appellants only amounts to a contention that some name ought to have been given to 550 saccharin to distinguish it from 330 saccharin. That, however, is a mere question of words.

[The Excise Licences Act, 1825 (6 Geo. 4, c. 81), and Attorney-General v. Green ^[F4] were also referred to.]

Judgment of Bray J. -

As there is a difference of opinion it becomes my duty to give judgment first.

The question we have to consider is a short one, viz., whether the appellants were bound to take out a licence as being manufacturers of saccharin within the meaning of the Finance Act, 1901. I am of opinion that they are not manufacturers of saccharin. They were dealing with saccharin, and with saccharin only. They applied chemical treatment to it, and it remained saccharin afterwards. It was saccharin of a different strength, and that was the only alteration which they made in it. The word "manufactured" is first used in s. 5 of the Act, and it seems to me quite clear that "manufactured" and "made" in that section mean practically the same thing. That section provides that certain duty shall be charged, levied and paid "on glucose made in Great Britain or Ireland," "on saccharin made in Great Britain or Ireland," and "on a licence to be taken out annually by a manufacturer of any such glucose, or saccharin." Sub-s. 2 provides that

"The duty on glucose may be charged either on the quantity actually manufactured"

- that must mean the same as "made," because the duty is to be on what is made -

"or by reference to the quantity ascertained by the Commissioners of Inland Revenue to be capable of being produced from the saccharin solution collected in a receiver to be provided by the maker and fixed and secured to the satisfaction of the Commissioners."

Was this saccharin made in Great Britain or Ireland? Take the case of imported saccharin. If 550 saccharin when produced from 330 imported saccharin has been made in Great Britain or Ireland, it follows that 550 saccharin produced from 330 saccharin which was made in Great Britain or Ireland has been twice made in Great Britain or Ireland, because there can be no difference whether 550 saccharin is made out of imported saccharin or out of saccharin originally made in Great Britain or Ireland. The 550 saccharin would therefore be twice made in Great Britain or Ireland and twice manufactured, and, whether the Crown claim it or not, ought to pay duty twice. I do not think that was the intention of the statute of 1901. I think the word "manufactured" rather means bringing into being as saccharin. Sect. 7 of the Act of 1901 contains the expression: "Where any manufactured or prepared goods." Those words seem to me to shew that "preparation" might be said to be a different thing from "manufacture."

It is said that saccharin is a substance of very small bulk, and that its manufacture requires to be very carefully watched lest the Revenue should be defrauded; but it is to be observed that these sections relate not only to saccharin, but to glucose and invert sugar. Invert sugar is a very bulky article. Most careful protection is given by s. 8, because that section provides that the Commissioners may make regulations

"as to the importation, labelling, wrapping, and sale of any saccharin .... and as to the proof to be required that a label has not been previously used .... and if any person imports or makes any such saccharin or delivers or uses molasses without complying with those regulations, or sells, exposes for sale, or offers, or keeps for sale any such saccharin in respect of which those regulations have not been complied with,"

a penalty shall be paid. Now these proceedings are taken under s. 9, which provides that

"the Commissioners of Inland Revenue may make regulations prohibiting the manufacture of glucose, saccharin, or invert sugar"

except by a person holding a licence. That obviously means the same "manufacture" as in s. 5, because s. 9 imposes a penalty on those who manufacture saccharin without taking out the licence mentioned in s. 5 as being subject to a duty of 1l.

We have to determine whether upon the facts stated in the case the appellants did manufacture saccharin. Let us see what those facts are. One of the admitted facts is that saccharin is a substance produced from toluene sulphonamide. That is the definition of saccharin. This saccharin was not produced by the appellants from toluene sulphonamide; it was produced (if it can be said to have been produced) from saccharin itself. The appellants have not manufactured saccharin from toluene sulphonamide. The case states that 330 saccharin is produced without eliminating certain para products, or only eliminating them to a very small extent. Then, in order to convert 330 saccharin into 550, certain of the para compounds have to be eliminated. Then it states that "this mixture" (that is, the 330) "is known commercially as 330 saccharin." The other mixture is known commercially as 550 saccharin. In both cases it is saccharin, and as a dutiable article 330 saccharin does not differ in the smallest degree from 550 saccharin. The same duty is payable on 550 saccharin as on 330 saccharin. What the appellants do is stated thus:

"The appellants subjected certain 330 saccharin to a chemical process..... This amount of 330 saccharin was not treated in one bulk, but in separate quantities. The result of this treatment was that in some cases 550 saccharin was produced, and in some cases a mixture sweeter than 330 saccharin but not so sweet as 550 saccharin was produced,"

and in some cases less sweet. But it was always saccharin; it was saccharin before it was treated, and it was saccharin after it was treated.

On these grounds it seems to me the appellants are not manufacturers of saccharin within the meaning of the Act of 1901, at all events so as to be compelled to take out a licence.