Comptroller of the Treasury v. American Cyanamid Co. , 240 Md. 491 ( 1965 )

Hammond, J.,

delivered the majority opinion of the Court. Barnes, J., dissents. Dissenting opinion at p. 508, infra.

If those who will have occasion to refer to this decision knew the background of the case, factual and legal, the text of this judicial sermon to the Comptroller and our holding could happily be no more than the words of Judge Offutt, for the Court, in Horton v. Horton, 157 Md. 127, 133: “But no practice, however generally, or however long, it may have prevailed, can override the clear and manifest meaning of a statute.”

Unfortunately for us (the Court which must prepare it) and for the lawyers and their clients who must from time to time hereafter read it, some reference will have to be made to the facts, the applicable sales and use tax statutes and the rules of the Comptroller purporting to interpret those statutes.

Bloomingdale Rubber Company makes adhesives which bind together the leading edges of the wings, tail surfaces, door panels and floor panels of both commercial and military aircraft. By reason of the specifications of the purchasers, Bloomingdale must make two tests of the binding qualities of each batch of several hundred gallons of the adhesive. In one test a panel of aluminum honeycomb core three inches wide, nine inches long by five-eighths of an inch thick, is sandwiched between two skins of aluminum sheeting of the same length and width, one being glued to each face of the honeycomb core. In the other test two of the pieces of aluminum sheeting are stuck to each other by adhesive from the batch being tested. As a part of both tests, each resulting panel is subjected to temperatures of over three hundred degrees Fahrenheit and to pressures of over twenty-five pounds per square inch and then placed in a testing machine which exerts force sufficient to pull the panel apart and records' the amount of force used. The honeycomb cores cost five- dollars and a quarter a pound and the sheets fifty-five and a half cents a pound. After serving in the tests, both the cores and the sheets are sold for scrap, both of these forms of aluminum having been rendered unusable by mechanical stresses which, twist, stretch, bend and crumple them and by the contamination of their surfaces resulting from the coatings of adhesive which cannot practicably be removed.

Code (1957), Art. 81, Sec. 325 (enacted with different rates as Sec. 260 of Art. 81 of the Code by Ch. 281 of the Laws of 1947), imposes a tax on every retail sale of tangible personal property, as defined. The tax has been held to be an' excise on the privilege of selling specified personal property at retail, to be collected by the vendor although paid by that purchaser who is the ultimate consumer, Lane Constr. Corp. v. Comptroller, 228 Md. 90, so as to avoid a pyramiding of the tax on the intermediate purchaser or purchasers. Comptroller v. Aerial Products, Inc., 210 Md. 627.

These designs of the statute which the cases have declared are revealed throughout the Retail Sales Tax Act (the sales tax act), codified in Art. 81 of the Code. “Selling” is defined in Sec. 324 (d) as any transaction whereby title or possession, or both, of tangible personal property is, or is to be, transferred by any means whatever for a consideration. The body, or first paragraph, of Sec. 324 (f) (in language which has remained unchanged since its enactment as part of then Sec. 259 of Art. 81 of the Code by Ch. 281 of the Laws of 1947), defines “retail sale” and “sale at retail” to mean:

“* * * all sales of tangible personal property to any person for any purpose other than those in which the purpose of the purchaser is to resell the property so transferred in the form in which the same is, or is to be received by him, or to use or incorporate the property so transferred, as a material or part, of other tangible personal property to be produced for sale by manufacturing, assembling, processing or refining.”

The purchaser whose purpose is to resell the property he buys in unchanged form or as á part or component of another thing he will produce is not required to pay the tax since he is not the ultimate consumer, but, rather, the tax must be paid by the final purchaser of the unchanged article or of the manufactured, assembled, processed or refined thing. Comptroller v. Fairchild Engine and Airplane Corp., 227 Md. 252.

Between the passage of the sales tax act and its effective date of July 1, 1947, the Comptroller promulgated a number of rules under the authority of then Sec. 301 (a) (now Sec. 365 (a)), authorizing him “to make, adopt and amend such rules and regulations as he shall deem necessary to carry out the provisions of this subtitle and to define any terms used herein.” One was Rule 63 purporting to interpret then Sec. 259 (f), the rule reading (as it has continued to do) as follows:

“The clause, ‘or to use or incorporate the property so transferred, as a material or part, of other tangible personal property to be produced for sale by manufacturing, assembling, processing or refining,’ as used in Sec. 259 (f) [324 (f)] shall be deemed to include all tangible personal property which is consumed in such operations.

“Tangible personal property shall be considered to be consumed in such operations if that property is materially changed in form and character, or consistency by reason of its use. Tangible personal property shall not be considered to be consumed in such operations if its value as property is ordinarily dissipated through the gradual wear or tear incident to its use.

For example, the sale of coal for use in manufacturing, assembling, processing or refining is not taxable. Machinery and small tools for use in manufacturing, assembling, processing or refining are taxable.”

We were told at the argument by the representative of the Comptroller, who was the representative of the Comptroller’s office in 1947, that during the passage of the act through the regular Legislature of 1947, a passage which was brought about only after determined and unrelenting administrative pressures had overcome bitter and sustained resistance, the Legislative agents of those who sold fuels other than coal used in producing tangible personal property for sale had persuaded the Legislature to amend the bill to provide in then Sec. 259 (f) (4) that the term “sale at retail” should include: “The sale of natural or artificial gas, oil, electricity or steam, when made to any purchaser for purposes other than resale or for use in manufacturing, assembling, processing or refining,” and that the producers and sellers of coal were disturbed and irritated because that fuel was not similarly excluded from tax-ability. After passage of the sales tax act, the administrative officials discovered that there was a possible, indeed in their view, a very probable infirmity in the title of the act under the holding of this Court in Buck Glass Co. v. Gordy, 170 Md. 685, which under judicial attack might eliminate the tax on sales other than conventional retail sales of small amounts. The consequence would be that wholesale sales as commonly understood would be excluded from taxability and so deprive the State of a large part of the revenues it had been expected the act would produce. To forestall attack on the act by the producers and vendors of coal, the Comptroller adopted Rule 63 which in purported effect amended then Sec. 259 (f) so as to add coal to other power or heat producing items used in the process of producing goods for sale.

Offered in evidence was a bulletin or notice of the Comptroller which was prepared in July 1947 and immediately sent to all persons, firms and corporations holding a sales or use tax license as required by the sales tax act and the complementary Maryland Use Tax Act (use tax act). It said in part:

“1. A Resale Certificate should be issued on the property being purchased if purchased for resale ‘as is’, or for resale as a part or material of a product produced for sale by manufacturing, processing, assembling or refining.

“The Comptroller has extended ‘materials which are purchased for incorporation into a product produced for resale’ to include such materials as are consumed in producing for resale products by manufacturing, assembling, processing or refining. Property shall be considered to be consumed in such operation if that property has materially changed in form and character or consistency by reason of its use. Property shall not be considered to be consumed in such operations if its value as property is ordinarily dissipated through the gradual wear or tear incident to its use.

“The above rule means that you may issue a Resale Certificate for property which is consumed. For example, coal that is used in manufacturing, assembling, processing or refining, since after coal is burned it no longer exists as coal, but has been changed in form and character. However, machinery and tools and other items used in manufacturing are taxable, since they are not consumed within the definition of the rule, but even after they have been worn out still retain their original form and character and their consistency. A worn out tool is still a tool.” (Emphasis added.)

To cure the dangers inherent in an infirm title and to give equality of treatment to coal, the Legislature was called into session on November 5, 1947, and passed Ch. 2 of the Laws of the Special Session of that year, repealing and reenacting subsection (f) of Sec. 259 of Article 81 of the Code, as said subsection was enacted by Ch. 281 of the Acts of 1947 (under a title that left no doubt that the terms “retail sale” and “sale at retail” included the sale of tangible personal property or service, as defined, in any quantity or quantities) to provide, among other things, in a new Sec. 259 (f) (4) that not only gas, oil, electricity or steam but also coal were not to be taxable if used in the process of producing goods.

Against this background Bloomingdale and American Cyanamid Co., which bought the assets and assumed the liabilities of Bloomingdale as of May 17, 1963, say that the tax of $1,348.50 on aluminum purchased for the testing of batches of adhesive between July 1, 1956 and December 31, 1961, which Bloomingdale paid upon being assessed therefor, and the similar tax in the amount of $970.84 for the period from January 1, 1962 to April 11, 1963, which American paid upon an assessment against Bloomingdale made on June 13, 1963, were not due and should be refunded. Their first argument is that while concededly Bloomingdale did not “incorporate” the aluminum as a “material or part” of the adhesive it manufactured, it did “use” the aluminum as a part of or in connection with the manufacturing process because it thus “used up” the aluminum; that if the word “use” is not given the meaning “to use up in the process of producing goods for sale,” it is the equivalent of “incorporate” and surplusage, and this construction is not to be presumed; and must be avoided if possible and, therefore, the section is at least ambiguous and should be construed in favor of the taxpayer and against the State since the sales are exclusions from the scope of the taxing statute and not exemptions under Baltimore Foundry and Mach. Corp. v. Comptroller, 211 Md. 316, 319-320, and Fair Lanes, Inc. v. Comptroller, 239 Md. 157. The second argument of the taxpayers is that the aluminum is consumed in the process of the manufacturing operation and is therefore non-taxable under the explicit specifics of Rule 63.

The Comptroller denied the refund for the period from 1956 to 1961 on the ground that the aluminum did not become a part of the adhesive as Sec. 324 (f) requires if it is to be non-taxable, and was not consumed under Rule 63 since it was not changed in' form; character or consistency. He denied the refund for the period from January 1, 1962 to April 11, 1963 because no protest against the assessment was made within thirty days, as required by law.

Judge Sodaro agreed in essence with the taxpayer both as to the construction of the statute and the applicability of Rule 63, finding it unnecessary to pass on the timeliness of the protest, and ordered a refund for both-periods.

We think (a) the statute is plain, clear and unambiguous and means that unless a purchase is made for the purpose of resale in unchanged form or as a part or component of other tangible personal property to be produced for sale, it is taxable ; (b) the aluminum is consumed by its use in testing the adhesive and its purchase would not give rise to taxation if Rule 63 were a valid interpretation of the statutes; and (c) Rule 63 unlawfully extended the exclusions from taxation provided by Sec. 324 (f) and goes beyond the power given the Comptroller to carry out the legislative directions in the sales tax act and to define terms and is invalid.

Sec. 324 (f) excludes from tax only property bought for the purpose of resale in the same form or with intent “* * * to use or incorporate the property * * *, as a material or part, of other tangible personal property to be produced for sale * * *.” In Armco Steel Corp. v. State Tax Comm’n, 221 Md. 33, 43-44, we interpreted the words “for processing or refining purposes” and recognized the rule of statutory construction that where two or more words are grouped together, and ordinarily have a similar meaning but are not equally comprehensive, the general word is limited and qualified by the special word — so that under this rule “processing” would be a synonym of “refining” — but we held the governing rule of statutory construction there to be that “* * * before words can be regarded as surplusage it must be clear that the enacting body could not possibly have intended the words to be in the legislation.” In the case before us it is obvious that under either test the Legislature specified that the property bought for resale had to remain unchanged or become an ingredient or part of another article in order to be excluded from tax. If “incorporate” limits and qualifies “use,” there must be a uniting or blending together of an article bought to aid in producing another article for sale, or an absorption of the first by the second. This concept of “incorporate” would remain if the words “use” and “incorporate” are read as having been intended to have similar but different meanings, but “use” would vary from the ordinary connotation of “incorporate” and mean a utilization of, a making use of, or an employment for the purpose of using the article purchased as a material or part of the product being made for sale. For example, the ingredients used to make the adhesive in this case would ordinarily and customarily be considered as incorporated into the final product. On the other hand, if paint were applied to cover the whole or part of an article being produced, it would be apt and perceptive to say that the paint was used as a material of the finished product, not that it was incorporated into that product. If one were describing, in the words of Sec. 324 (f) what the purpose was of a maker of automobiles, lawn mowers, wheelbarrows, or outdoor grills in buying from a parts manufacturer wheels to be attached to his product, it would be customary and natural to say that he intended to use the wheels as parts of his vehicles or appliances, not that he was incorporating them. This reading of the words “use” and “incorporate,” as employed in Sec. 324 (f), is in accord with dictionary definitions of the words. Funk and Wag-nails Standard Dictionary of the English Language defines “incorporate” to mean “to combine together * * * so as to form one harmonious or consistent whole.” It defines “use” to mean, as a first meaning, “to employ for the accomplishment of a purpose — turn to account — make use of.” The Oxford Dictionary says “incorporate” means “to combine or unite into one body or uniform substance; to mix or blend thoroughly together * * It defines “use” as meaning “to employ or make use of (an article, etc.), esp. for a profitable end or purpose; to utilize, turn to account.” An illustration of this definition is “In the manufacture of surgeons’ instruments * * *, the very best steel * * * should be exclusively used.”

We think the plain and manifest meaning of the initial paragraph of Sec. 324 (f) leaves no room for a holding that the words “* * * to use * * *, as a material or part, of other tangible personal property * * *” mean a using up of the property purchased as a part of the process of producing other tangible personal property, or as having any meaning other than that spelled out in the statute.

Our conclusion is fortified by other provisions of the sales tax act and the complementary use tax act. Sec. 324 (f) (3) provides that a “sale at retail” shall include “the sale of tangible personal property to contractors, builders or landowners for use or resale in the form of real estate,” thus defining the final utilizer of the tangible personal property as such as its ultimate consumer and, so, liable for the sales tax. Sec. 326 (a) exempts from sales taxes sales to the State of Maryland or to any of its political subdivisions. The Comptroller’s Rule 70 provided in part that contractors who are performing jobs for the State or any of its political subdivisions on a lump-sum basis “* * * are not required to pay the tax on materials and supplies which will be incorporated into the job * * *. The contractor must pay the tax on all equipment which he purchases even though it may be used on a job for one of the aforementioned persons.” A circular letter of the Comptroller advised interested persons that those performing lump-sum contracts with the State or a subdivision “may purchase tax free the materials which will actually be incorporated into and remain a part of the completed job. The tax must be paid on all materials, supplies and equipment which are not incorporated and do not remain as a part of the completed job, for example: form lumber, dynamite, rubber boots and other clothing, tools and equipment, etc.” Comptroller v. Joseph F. Hughes Co., 209 Md. 141, 144. Following John McShain, Inc. v. Comptroller, 202 Md. 68, it was held in Hughes that Rule 70 was valid on the point — since an exempt person became the owner of the real estate into which the personal property went and would have paid no tax had it bought the personal property itself, and that Hughes, under a lump-sum contract with the City of Baltimore, must pay the tax on form lumber for concrete, nails and hardware used in the form lumber, muriatic acid for cleaning bricks, fuel for temporary heating (all claimed to be destroyed by their use), and photographs of the building’s progress, and special bits for tools. Rule 63 was urged on the Court by Hughes to support its claim that personal property consumed in the process of production of things for sale were excluded from tax. We said: “We find it unnecessary to pass on the validity of this Rule.” Hughes, supra, at 148.

When the use tax was enacted at the regular session of the Legislature in 1947, after the sales tax became law, then Sec. 310 (f) of the use tax act exempted from tax, among other things, tangible personal property not readily obtainable in Maryland which was used in the State by one manufacturing “* * * any article, substance or commodity, if such tangible personal property enters into the processing of or becomes an ingredient or component part of the product * * * which is manufactured, compounded or furnished * *

In Compt. of Treasury v. Crofton Co., 198 Md. 398, 404,. Judge Markell, for the Court, said:

“* * * section 310 (f), however narrowly construed, would not be a mere duplication of section 308 (d) (2) and (e) (2) [of the use tax act] ¹ since the latter are applicable only to incorporation of personal property ‘as a material or part of other tangible personal property to be produced for sale by manufacturing’, whereas section 310 (f) is applicable if the personal property ‘enters into the processing of or becomes an ingredient or component part of the product’. On- the other hand, whether broadly or narrowly construed, section 310 (f) does in part duplicate section 308 (d) (2) and (e) (2). Furthermore, to the extent that section 310 (f) is not a duplication of section 308 (d) (2) and (e) (2), it is an exemption new in the Use Tax Act and without a parallel in the Retail Sales Act [Judge Markell had earlier indicated that Sec. 259 (f) of the sales tax act and Sec. 308 (d) (2) and (e) (2) of the use tax act were essentially identical] and is a departure from the basic purpose of the act to complement the retail sales tax by a compensatory tax.” (Emphasis added.)

This passage is a clear statement by this Court in 1951, four years after the passage of the sales and use tax acts, that then Sec. 259 (f) of the sales tax act (now Sec. 324 (f)) did not mean that property was excluded from the sales tax if it “enters into the processing of” an article being manufactured, but that said section means that to be excluded, the property must become “an ingredient or component part of the product.” This makes untenable the contention of the appellees as to the meaning of Sec. 324 (f) which was adopted by Judge Sodaro. Further, in Baltimore Foundry & Mach. Corp. v. Comptroller, 211 Md. 316, 319, this Court referred to the exclusion in Sec. 324 (f) (then 320 (f)) as applying to property purchased “* * * for the purpose of incorporation into a finished product * * See also Comptroller v. Fairchild, supra, where Judge Henderson, for the Court, held that personal property bought by Fair-child which became a part of missiles sold to the Government for testing was not subject to sales or use tax. He referred to Code (1957), Art. 81, Sec. 372 (d) (2) (former Sec. 308 (d) (2)) of the use tax act (in which “use” is defined as not including property held for “the incorporation of tangible personal property as a material or part of other tangible personal property to be produced for sale * * *”) and Sec. 324 (f) (former Sec. 259 (f)) of the sales tax act, and said of Sec. 372 (d) (2): “Almost identical language is used in Code (1957), Art. 81, sec. 324 (f) in regard to sales at retail, and we shall treat the two together. The taxes are, of course, complementary.”

The use tax act of the District of Columbia contains the identical language found in Sec. 324 (f). In Briggs & Co. v. District of Columbia, 196 F. 2d 241, 243, the Court of Appeals for the District of Columbia held that cellulose casings used and consumed in the manufacture of frankfurters for sale were taxable to the manufacturer. The Court said:

“Much could be said in favor of exempting from the coverage of the statute property used in the sense of being consumed in the manufacturing process where, as here, the value of the casing so used is represented in some part at least in the finished product * * *. See Western Cartridge Co. v. Smith, 2 Cir. 1941, 121 F. 2d 593. But the statutory language does not, as in the cited case, exempt an article used ‘as material in the manufacture of’ another article, but only one used as a ‘material or part of’ the other or incorporated in it.”

To the argument that Congress had adopted the Maryland statute verbatim for the District of Columbia and therefore Rule 63 controlled the meaning of the District counterpart of Sec. 324 (f), the Court took the view that for this to be so the construction of the adopted statute must have been by the highest judicial authority of the originally enacting state and said: “But at least in the absence of a more settled interpretation, or one of high state, judicial authority, we are free to apply the District statute differently.”

It is apparent that when the Maryland Legislature desired that personal property consumed in the making of other personal property should be excluded from the coverage of the sales or use tax, it stated its desire so clearly that there could be ho doubt of its intent. Not only did it do so in then Sec. 310 (f) of the use tax act (“* * * if such tangible personal property enters into the processing of or becomes an ingredient or component part of the product * * *”), construed in Crofton, but it also did so in Sec. 259 (f) of the sales tax act as first enacted, now as Sec. 324 (f), the critical statute in the case. In Sec. 259 (f) (4) it made taxable “the sale of natural or artificial gas, oil, electricity, or steam, when made to any purchaser for purposes other than resale or for use in manufacturing, assembling, processing or refining(Emphasis added.) It is highly significant that when the attention of the Legislature was directed to the problem caused by the statute’s failure to exclude coal from taxation and the Comptroller’s attempt to extend the statute by rule to so exclude coal, the Legislature did not, at the Special Session of 1947 or thereafter, change the language of exclusion in the first paragraph of then Sec. 259 (f) — “* * * to use or incorporate * * *, as a material or part,” of a product made to be sold to conform to the comptroller’s extension of the language’s meaning. Rather, the lawmakers added coal to the list of items excluded from tax by subparagraph (4) of Sec. 259 (f) if such items were purchased “* * * for use in manufacturing * *

There remain the questions of the effect of administrative interpretation of Sec. 324 (f) and of possible legislative acquiescence in that interpretation. It is well settled by many cases that where the language of a statute is ambiguous and uncertain a contemporaneous construction which has been consistent and unchallenged, although it is not controlling, may be resorted to as an aid in determining the legislative intent and will not be overturned except for cogent reasons, particularly where there have been subsequent legislative reenactments without change of the language construed.²

We think these propositions do not control the decision here. In our view the purpose of the Legislature in enacting the critical language of Sec. 324 (f) is evident and the expression of its intent clear and manifest. Since we find no ambiguity or uncertainty in the statute, there is no need to look beyond its words to find its meaning. We do not regard the promulgation and continued existence of the Comptroller’s Rule 63 as a consistent and unchallenged administrative interpretation and practice because the Legislature at the Special Session of 1947 did not indicate agreement with the Comptroller’s position that coal, the raison d’etre of Rule 63, was excluded by the language of the body of then Sec. 259 (f) changing the language of the body of that section to read that property consumed by its use in the process of making another tangible product is excluded from taxation, but, rather, amended the law to put coal in the special category of gas, oil, electricity and steam (which were originally excluded from tax by Sec. 259 (f) (4) ) if purchased “for use in manufacturing,” and so forth.

The Comptroller’s Rule 63, according to the bulletin which was issued to explain it, did not purport only to carry out the sales tax act or to define the terms used therein but to “extend” the meaning and effect of the legislative provisions, and so to exclude from taxation something the Legislature had subjected to tax. There can be no challenge to the proposition that the Comptroller cannot by rule or otherwise make taxable that which the Legislature has excluded or exempted from taxation and cannot exclude or exempt that which the law says is taxable.

The administrative interpretation of Sec. 324 (f) made by Rule 63 has not been the interpretation given to that section by this Court. In Crofton we said in 1951 (without referring to the Rule in terms) that Sec. 259 (f) did not mean what Rule 63 said it meant by extension of the legislative meaning and, subsequently, similarly indicated the same view in Aerial Products and Fairchild.

We conclude that the controlling rule of law which must be applied here is that expressed in the quotation from Horton, with which this opinion began. It was paraphrased at greater length and applied in imposing an inheritance tax in Bouse v. Hutzler, 180 Md. 682, 687, as follows:

“Nevertheless, even if there had been an unvarying practice, the Court of Appeals would not sanction a method of calculation which would tolerate an evasion of taxes payable to the treasury of the State. It is quite true that where the language of a statute is ambiguous and susceptible of two reasonable constructions, a long and unvarying administrative practice has a very persuasive influence, if not an entirely controlling effect, upon the judicial construction of the statute. But the rule of contemporaneous construction does not preclude an inquiry by the courts into the correctness of such a construction. Where the language is clear and explicit, and susceptible of a sensible construction, it cannot be controlled by extraneous considerations. No custom, however long and generally it has been followed by officials, can nullify the plain meaning and purpose of a statute. An administrative practice contrary to the plain language of a statute is a violation of the law; and a violation of the law, even though customary, does not repeal the law.”

In Rogan v. Baltimore & O. R. R., 188 Md. 44, 58, in upholding a method of computation of tax contrary to the unvarying practice for sixty years, this Court said:

“No custom, however venerable, can nullify the plain meaning and purpose of a statute. * * * In spite of an unvarying administrative practice, the Court should not sanction a method of computation which tolerates an evasion [or avoidance] of taxes. Any alleged failure of taxing officials in previous years to assess the gross receipts accurately cannot abolish the duty imposed by law upon their successors, or control the judicial construction of the statute.”

Judge Prescott, for the Court, cited Rogan in Stembler and Ford, Inc. v. Capitol Heights, 221 Md. 113, 117, and said: “[I]f the language is plain and free from ambiguity and has a definite and sensible meaning, such is conclusively presumed to be the meaning of the legislative body in enacting the statute or ordinance.” County Treasurer v. State Tax Comm’n, 219 Md. 652, 657, held that a custom of thirty years standing could not control the statute to the contrary since there was no ambiguity in the law. “Administrative construction is called into play only when two reasonable interpretations of the act to be construed are possible. ‘But where the language is plain and unambiguous, the judicial construction cannot be controlled by extraneous considerations.’ ”

In several sales or use tax cases we have applied the principle of these cases and have held rules or parts of rules of the Comptroller as to sales or use taxes to be invalid because they varied the law. Part of Rule 61 was invalidated in Comptroller v. M. E. Rockhill, Inc., 205 Md. 226, 234-35. In Comptroller v. Pittsburg-Des Moines Steel Co., 231 Md. 132, 136, Judge Prescott for the Court said of that part of Rule 70 which discriminated against the federal government in favor of the government of the State and its subdivisions: “The Comptroller has no power or authority to create an exemption by Rule. Rule 70 derives whatever force it has from the fact that it is a correct interpretation of the statutes promulgated by the Legislature” and held that the second paragraph of Rule 70 was null and void insofar as it purported to tax contractors under lump-sum contracts with the federal government. Cf. Steiner Constr. Co. v. Compt. of Treas., 209 Md. 453, 469, where Chief Judge Brune for the Court said:

“If the provisions of Rule 53 relating to Class (d) contracts therein described would produce in this case a result at variance with the views above expressed, they would, we think, go beyond the permissible limits of administrative interpretation, since they would, on the facts of this case, nullify the applicable statutory definition of the term ‘sale at retail’ and would grant an exemption where the statutes grant none.”

The claims of the appellees to refunds must be denied because of the clear and manifest purpose and meaning of Sec. 324 (f).

Orders of the Baltimore City Court appealed from reversed, with costs, and orders of the Comptroller denying refunds to the appellees reinstated.

1 . Sec. 308 (d) (2) (now Sec. 372 (d) (2) ) provides that the term “use” “* * * * shall not include the following: * * * The incorporation of tangible personal property as a material or part of other tangible personal property to be produced for sale * * Sec. 308 (e) (2) (now Sec. 372 (e) (2)) provides that the term “storage” “* * * shall not include the following: * * * The keeping * * * in this State of tangible personal property for the purpose of incorporating said property as a material or part of other tangible personal property to be produced for sale * *

2 . Dvorine v. Castelberg Jewelry Corp., 170 Md. 661, 673; Wells v. Price, 183 Md. 443, 457; Smith v. Higinbothom, 187 Md. 115, 132-33; Bosley v. Dorsey, 191 Md. 229, 239; Department of Tidewater Fisheries v. Sollers, 201 Md. 603, 615; Comptroller v. Joseph F. Hughes Co., 209 Md. 141, 145; Kimball-Tyler Co. v. Mayor & C. C. of Baltimore City, 214 Md. 86, 99; Liss v. Goodman, 224 Md. 173, 179.