Appeal from decree of Court of Common Pleas of Dauphin County, No. 389 Commonwealth Docket, 1961, in case of Commonwealth of Pennsylvania v. Yorktowne Paper Mills, Inc.
Edward T. Baker, Deputy Attorney General, with him William C. Sennett, Attorney General, for Commonwealth, appellant.
Lewis H. Markowitz, with him Robert H. Strickler, and Markowitz, Kagen & Griffith, for appellee.
Richard C. Fox, with him McNees, Wallace & Nurick, for amicus curiae.
Bell, C. J., Musmanno, Jones, Eagen, O'Brien and Roberts, JJ. Opinion by Mr. Justice Musmanno. Mr. Justice Cohen took no part in the consideration or decision of this case.
The Yorktowne Paper Mills, Inc. is engaged in the manufacture of paper and allied products. In the manufacturing process it uses a chemical known as "A-Gel", a coagulating aid, and a chemical known as "Remox", a softening agent, which are placed in the boilers for the purpose of eliminating scale and corrosion and thus prolonging the life of the boilers and maintaining them in good operating condition. The boilers produce the steam required in the manufacture of paper board. The steam dries the paper, heats the water in the heater to a 140 degrees (Fahrenheit) temperature, and runs the turbine which operates the paper machine.
Yorktowne also employs a chemical known as "Du-Jet", a cleaning agent, which is applied to the felt conveyor belt to keep it free and clear of foreign material that would otherwise adversely affect the drainage of water through it. As the liquid paper is carried by the belt through the wet end of the paper machine, the water drains through the felt and is used again. Keeping the felt clean is an important matter.
Yorktowne purchased a considerable quantity of these chemicals "A-Gel, "Remox: and "Du-Jet" from March 7, 1956 up to and including May 31, 1959, and the Commonwealth of Pennsylvania made an assessment against it for a sales and use tax on the purchases.
The Commonwealth also levied a sales and use tax on Yorktowne's purchases of lumber, nails and metal bands used in constructing pallets employed in transporting the company's products. A pallet or skid consists of three parallel pieces of lumber with four boards, spaced about one inch apart, nailed across them, as if for flooring, with four boards nailed across the back. The manufactured rolls are then placed on the pallets or skids and secured thereby by placing
metal bands around the entire unit. Yorktowne's customers (wholesalers) are not required to return the skids or pallets since they are not reusable, being roughly constructed of an extremely poor grade of lumber.
Yorktowne paid the sales and use tax on the purchase of the above designated items, but immediately filed a petition for refund which was denied by the Board of Finance and Revenue. It then appealed to the Court of Common Pleas of Dauphin County, which court, after hearing, and after determination of certain procedural issues which had been advanced by the Commonwealth, not here material, ordered the Department of Revenue to refund the sales and use tax of $852.36 paid by ...