The People of the State of New York ex rel. Syracuse Improvement Company, Relator, v. William J. Morgan, as Comptroller of the State of New York, Respondent

The People of the State of New York ex rel. Syracuse Improvement Company, Relator, v. William J. Morgan, as Comptroller of the State of New York, Respondent. Corporation tax — the Comptroller, on a revision, cannot increase it for some yea/re because he has reduced it in others — the prepcoration of a street and the placing thereon of an asphalt pamement is not a process of manufacture-^ quaere as to the prepa/i’ation of the asphalt. The fact that the State Comptroller, upon a revision and readjustment of the taxes assessed against a corporation during several years, finds that in some of such years taxes were collected which could not have been lawfully demanded, and reduces the account pro tanto, does not authorize him to increase the amount of the taxes assessed against the corporation during other years. The preparation of a street for the purpose of laying an asphalt pavement thereon, . and the placing of such pavement thereon is not á process of manufacture-within the meaning of the statutes .relating to the exemption of manufacturing corporations from taxation (Laws of 1880, chap. 542, § 3; Laws of 1889, chap. 353; Laws of 1896, chap. 908, § 183). Qwcere, whether the preparation of the asphaltum as a compound used in making the pavement is a process of manufacture within the meaning of those statutes. Certiorari issued out of the Supreme Court and attested the 17th day of October, 1899,' directed to William J. Morgan, as Comptroller of the State of New York, commanding him to certify and return to the office of the clerk of the county of Onondaga all and singular his proceedings in revising and readjusting a tax assessed against the relator under chapter 542 of the Laws of 1880, and section 195 of chapter 908 of the Laws of 1896. ' The relator is a corporation formed in 1892 under the Business Corporations Law (Laws of 1890,- chap. 567, as amd. by Laws of 1892, chap. 691). In its certificate of incorporation is stated : “Its object and the nature of its business is to construct and repair streets, alleys, roads, pavements, sidewalks, crosswalks, gutters, curbing, sewers, bridges and culverts, * * In 1896 the Comp- troller, pursuant to the statute, ordered and stated the account of the relator’s franchise tax at $168.75 for each of the years ending October 31, 1893, 1894, 1895 and 1896. This amount was reached by assessing at the rate of one and one-half mills on $112,500, the amount of the capital stock outstanding. Upon a petition for a readjustment and revision of that account it was adjusted so that for the year ending October 31,1893, the sum of $41.25 was assessed as one and one-half mills upon a valuation of capital stock of $27,500. For the year ending October 31,1894, the sum of $53.48 was assessed as one and one-half mills upon a valuation of capital stock of $35,650. For the year ending October 31, 1895, $1,875 was assessed as fifty mills upon an alleged rate of dividend of 200, valuing the capital stock at $37,500. For the year ending October 31, 1896, $187.50 was assessed as five mills upon the alleged rate of dividend of twenty per cent, valuing the capital stock at' $37,500 and $74.25 as one and one-half mills upon a valuation of capital stock of. $49,500. William Nottingham,, for the relator. John C. Davies, Attorney-General, and Henry B. Coman, for the respondent. [MAJORITY — Smith, J.:] Smith, J.: Two questions are raised by the relator’s appeal: First, had the •Comptroller authority upon the revision or readjustment of the tax to increase the amount thereof, as was done for the years ending October 31, 1895, and October 31, 1896 ? Second, is the relator a manufacturing corporation wholly engaged in manufacturing within the State within the provisions of section 3 of chapter 542 of the Laws of 1880, as amended by chapter 353 of the Laws of 18.89 ? The first question is, we think, substantially answered by the decision of this court in the case of People ex rel. Eppens Oo. v. Pdberts (51 App. Div. 152). In that case it was held that to give jurisdiction to the Comptroller to readjust or revise the tax, it must be made to appear that the account of taxes stated by the Comptroller included those which could not be lawfully demanded, and as upon the readjustment no. such fact appeared, the Comptroller was unauthorized to increase the tax assessed. It is urged by the Attorney-General that in the account of taxes stated by the Comptroller and here revised, taxes were included for the years 1893 and 1894 which could not be lawfully demanded; that with this fact proven the jurisdiction of the Comptroller attached and the increase added to the assessment for 1895 and 1896 was, therefore, within the power •of the Comptroller in his revision and readjustment of the account. While, however, the condition to jurisdiction technically exists, it does not necessarily follow that in the permission given to the Comptroller by the statute to revise and readjust was intended to be included the right to increase the taxes assessed. As has been held in the Eppens case, the right to any revision is conditioned upon the fact of the inclusion of some illegal tax in the account. Under the ■contention of the Attorney-General, if one dollar of the account is found to be illegally assessed in any year, this .fact at once vests power in the Comptroller to add any sum he may think proper to the assessment for any other year. If such be the true reading of the statute, we are at a loss to understand why any condition was placed upon the power of' the Comptroller to revise and readjust, other than the mere moving of the party thinking himself aggrieved. It is hardly conceivable that it was the intention to confer the power to increase an assessment, if some part of the tax had been unlawfully assessed, and otherwise withhold it. The provision of law is the exercise of the supreme power of the State to take from this corporation its property. By settled principles of interpretation the power claimed must be clearly read in the statute. Within this rule of interpretation, it must be held that the inclusion of a single unlawful item in the assessment of any year included in the account vests in the Comptroller no greater power to increase the assessment otherwise appearing in the account than if this unlawful item had not been included, and that the increase in the assessment for the years 1895 and 1896 was, therefore, unauthorized. The relator’s contention that the Comptroller was unauthorized to change the basis of his assessment for the years 1895 and 1896 is without merit. If the assessment were not in excess of that to which the corporation was lawfully subject, it is not illegally made, whatever rule may have been adopted by the Comptroller. Upon the second question raised, it is argued that the business of the relator is solely that of manufacturing, and that within the governing statute the relator was, during the whole period stated in the account, wholly exempt from taxation. Section 3 of chapter .542 of the Laws of 1880 exempted from the tax here imposed “ manufacturing corporations carrying on manufacture within this State.” By chapter 353 of the Laws of 1889 this section was amended so as to exempt only manufacturing corporations or companies wholly engaged in carrying on manufacture within this State. This was the law under which the assessment was made in the account for the years 1893, 1894 and 1895. By section 183 of the General Tax Law (Chap. 908 of the Laws of 1896), a manufacturing corporation is exempt “ to the .extent only of the capital actually employed in this State in manufacturing and in the sale of the product of such manufacturing.” The argument of the relator’s counsel is, first, that both the preparation of the compound and the making of the pavement are manufacturing, and thus that the corporation is wholly engaged in manufacturing within the State. We may concede for the argument that the compounding of the asphalt mixture, which is used in constructing the pavement, is a process of manufacture. We cannot agree, however, that the preparation of the street for the laying of the pavement and the placing of the pavement thereupon is in any sense a process, of manufacture within the meaning of the statute. It would hardly be contended that the laying of a brick, pavement was a process of manufacture, although the brick for the pavement may be manufactured. In the preparation of the asphaltum compound which is used in the pavement, it appears that $25,000 of the capital of the relator is employed. Assuming this preparation to be a process of manufacture, the large majority of the capital of the relator is employed in business other than in this manufacture. The relator, therefore, does not reach the condition of the act of 1889 authorizing its exemption from this tax.. . It is further contended on relator’s behalf that at least $25,000 of the capital should be exempt from taxation under the Tax Law of 1896, as employed in the business of manufacturing. The tax for the year 1896 as originally stated was $168.75. We have held that this tax could not upon this revision be increased. If we assume that the relator is entitled to exemption upon $25,000 of the capital as employed in the business of manufacture, the amount originally assessed is still within the sum which could properly be assessed for the year 1896. The finding of the Comptroller as to dividends, declared, we think a legitimate inference from the evidence. It is-unnecessary, then, to determine whether the preparation of this, asphaltum compound used in making the pavement is a process of manufacture within the meaning of the statute. These views lead to a modification of the determination of the Comptroller by reducing the tax for the years 1895 and 1896 to the amount originally stated by him in his account. All concurred. Determination of Comptroller modified so as to reduce the tax assessed for the years 1895 and 1896 to $168.75 for each year, and as so modified affirmed, with $50 costs and disbursements to relator.