Appeal from the Order of the Board of Finance and Revenue in case of In Re: Appeal of Morrisville Scrap Processing Company, Inc., from denial of Petition for Resettlement of Capital Stock Tax for year ending September 30, 1969.
Lewis H. Markowitz and Howard Gould, with them F. Joseph Larkin, Markowitz, Kagen & Griffith and Gould, Reichert & Strauss, for appellant.
Edward T. Baker, Deputy Attorney General, for appellee.
Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. President Judge Bowman did not participate. Opinion by Judge Rogers. Dissenting Opinion by Judge Blatt.
[6 Pa. Commw. 121 Page 122]
In this case, a dealer in scrap metal seeks a decision that it is engaged in manufacturing and therefore exempt from capital stock taxation, under the Capital Stock Tax Act, Act of June 1, 1889, P.L. 420, as amended, 72 P.S. 1871.*fn1
The Commonwealth assessed the capital stock tax against the appellant for its fiscal year ending September 30, 1969, although the Act provided that it should ". . . not apply to the taxation of the capital stock of corporations . . . which is invested in and actually and exclusively employed in carrying on manufacturing . . . within the State. . . ." The appellant contends that its capital stock is actually and exclusively employed in carrying on manufacturing. Although the decided cases are against its position, appellant claims that the record made by it, unlike those of earlier cases, contains such "technical and metallurgical testimony" and evidence of "chemical changes" to the scrap under the appellant's ministrations as should convince us that a result different from that previously reached should here obtain.
[6 Pa. Commw. 121 Page 123]
We make the following findings of fact:
1. The appellant is a Pennsylvania corporation and during its fiscal year here in question was engaged in the scrap metal business.
2. Appellant's plant is at Morrisville, Pennsylvania, near the Fairless Works of the United States Steel Company.
3. Appellant collects scrap metal from the following sources: junk automobiles from auto wreckers; so-called "home scrap" from the steel mills, being the croppings from billets or ingots, improperly rolled sheets, and discarded pipe, beams and other items; trimmings from automobile stamping plants; and punchings from fabricators of plates and beams.
4. The appellant removes the nonferrous materials from junk automobiles including copper, brass, wire, seats, rubber, aluminum, the motors and any other die cast materials.
5. Appellant separates the ferrous metals obtained from the several sources mentioned into approximately ten or twelve so-called grades of scrap useful in the steel-making business. The United States Steel Corporation, the appellant's principal customer, supplies specifications for the several grades, some for use in their open hearth furnaces and some for use in the newer electric furnaces.
6. Although the separation by the appellant of types of scrap is essential for use in the steel mills, nothing tangible is added to the scrap by the appellant. Although the separating operation requires some skill, the classification descriptions supplied by the mills are not highly technical.
7. After having separated the scrap the appellant cuts and shapes some into bundles of size and density suitable to be inserted into the steel manufacturers' furnaces. This it performs by means of huge and costly
[6 Pa. Commw. 121 Page 124]
hydraulically operated presses and shears. Some of the scrap requires only cutting to lengths suitable for insertion into the furnaces.
8. While the pressing operation engaged in by the appellant produces heat, the only effect of the heat is to soften the scrap so that it may compact to a greater extent. Neither the heat produced in the compacting operation nor any other thing done by the appellant produces a chemical change in the scrap metal.
9. The pressing operation causes the elimination of the open spaces in the material, so that it becomes more like a solid piece of steel. In this sense only it makes the materials more dense.
10. If scrap material is not compacted or is insufficiently compacted when placed into the steelmaker's furnace, it either changes to iron oxide and becomes part of the slag layer of the furnace or, in the case of an electric furnace, requires more frequent back charging of the furnace with accompanying reduction of productivity. Therefore, the denser the bundles can be made, the more valuable they are to the steel mill.
11. The scrap as it comes to appellant's plant is potentially but not actually valuable; after the separating, shearing and compressing operations performed upon it by the ...