This action was brought in the United States District Court for Minnesota by the Tilden Produce Company against petitioner's testator, E. J. Lynch, collector of internal revenue for the district of Minnesota, to recover $936 stamp taxes, which it was compelled to pay on 9,360 pounds of butter seized as adulterated by the Commissioner of Internal Revenue. At the trial, a verdict was directed in favor of the company, and judgment was entered for the amount paid with interest. The Circuit Court of Appeals affirmed the judgment. 282 Fed. 54. The case is here on certiorari under section 240 of the Judicial Code (Comp. St. § 1217). 260 U. S. 718, 43 Sup. Ct. 99, 67 L. Ed. 480.

The question for decision is whether the butter was adulterated within the meaning of the Act of May 9, 1902, c. 784, 32 Stat. 193.

In 1918, the company manufactured in its creamery at St. Paul 350 tubs of butter, which it shipped to Chicago. At the time it was made, the company tested the butter and found the moisture content to range between 15 and 16 per cent., and the average to be 15.68 per cent. Samples were taken at Chicago, and tested under the direction of the Commissioner of Internal Revenue. It was found that the moisture content of the butter in 156 tubs was 16 per cent. or more, that the range was between 16 and 17.93 per cent., and that the average was 16.76 per cent. The butter was made by the company by methods generally followed in the manufacture of butter in creameries. It was shown by the evidence that the moisture content in butter varies greatly; that the variation ranges from 9 to over 20 per cent., and that there is no fixed standard. The moisture content of milk is over 90 per cent., and of cream over 60 per cent. The making of butter involves the segregation of the fat and the elimination of water. After churning and draining off buttermilk, it is the general practice of buttermakers to use water to wash out curd and liquids remaining in association with the butter. While some of the water used for that purpose may remain, washing usually lessens the total moisture. Within certain limits, buttermakers are able to control water content. It is tested while the butteris in the churn. It may be reduced by manipulation, or water may be incorporated into or mixed with the butter, so as to increase the water content, by working the butter under conditions calculated to accomplish that purpose. In practice, makers sometimes reduce or increase moisture content in order to meet competition in the market.

Adulterated butter, as defined by section 4 of the Act of May 9, 1902 (Comp. St. § 6233), includes: (1) A grade produced by treatment of different lots of butter to which a chemical or other substance is added to deodorize it or to remove rancidity; (2) a butter product with which is mixed a foreign substance to lessen its cost; and (3) 'any butter in the manufacture or manipulation of which any process or material is used with intent or effect of causing the absorption of abnormal quantities of water, milk, or cream.'

In 1907, the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, promulgated Regulation No. 9, which contains the following:

'Adulterated Butter Defined.—The definition of adulterated butter as contained in the Act of May 9, 1902, embraces butter in the manufacture of which any process or material is used whereby the product is made to 'contain abnormal quantities of water, milk or cream,' but the normal content of miosture permissible is not fixed by the act. This being the case it becomes necessary to adopt a standard for moisture in butter, which shall in effect represent the normal quantity. It is therefore held that butter having 16 per cent. or more of moisture contains an abnormal quantity and is classed as adulterated butter.'

Petitioner contends that the promulgation of this regulation is authorized by section 20 of the Act of August 2, 1886, 24 Stat. 212 (Comp. St. § 6232), and R. S. § 251. It is provided by section 20 that:

'The Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, may make all needful regulations for the carrying into effect of this act.'

To a limited extent, this section was made applicable to the Act of May 9, 1902, by section 4 thereof (Comp. St. § 6238), which provides that it 'shall apply to manufacturers of 'adulterated butter' to an extent necessary to enforce the marking, branding, identification and regulation of the exportation and importation of adulterated butter.' R. S. § 251 (Comp. St. § 384), authorizes the Secretary of the Treasury to 'prescribe * * * rules and regulations, not inconsistent with law, to be used under and in the execution and enforcement of the various provisions of the internal revenue laws,' and to 'give such directions to collectors and prescribe such rules * * * as may be necessary for the proper execution of the law. * * *'

The mere fact that the butter contains 16 per cent. or more of moisture does not bring it within the terms of the statutory definition of adulterated butter. Under the definition in section 4, there must be something in the manufacture or manipulation of the butter causing the absorption of abnormal quantities of water, milk or cream. This must result from the use of some material or process. The use must be with intent to cause such absorption, or must be calculated to produce that result. 'Absorption' should be read to include the introduction of moisture from the outside and the incorporation of water into the butter, whether it is technically an absorption or not. Obviously, it does not include moisture originally contained in the cream or butter. The act does not prescribe the amount of moisture permissible or fix any rule or criterion by which to determine the amount that is deemed 'abnormal' or that lawfully may be absorbed and incorporated.

The regulation makes water content the sole test of adulteration, without regard to other provisions of the act. In support of its validity, it is said that, in declaring 16 per cent. of moisture in butter is abnormal, the regulation does no more than to establish a scientific fact. But it goes beyond that, and declares such butter to be adulterated. It omits essential elements of the statutory definition: namely, the use of a process or material in the manufacture of the butter, and the causing of absorption,—i. e., the incorporation or taking in from the outside—of abnormal quantities of moisture.

Congress has not delegated power or authority to make such a regulation. Section 20 of the Act of August 2, 1886, does not apply. It is made applicable only in respect of the marking, branding, identification and regulation of exportation and importation of adulterated butter; it does not authorize a regulation establishing what shall be deemed to constitute excessive moisture or the 'absorption of abnormal quantities of water, milk or cream'; it grants no power to add to or take from the statutory definition of adulterated butter. Section 251 of the Revised Statutes confers upon the Secretary of the Treasury authority to make certain rules and regulations, but it grants no power to the Commission of Internal Revenue alone. To make any regulation by him on the subject effective, it must be approved by the Secretary, in which event it really becomes a regulation of the latter. Moreover, the rules and regulations authorized by section 251 are required to be 'not inconsistent with the law.' The regulation prescribes a standard which Congress has not authorized the Commissioner or the Secretary to fix. It sets up a definition of adulterated butter which conflicts with that contained in the act. The two cannot be read in harmony. If given effect, the regulation would eliminate from the definition of adulterated butter the conditions specified in the act and strike out words and phrases and substitute others for them. In effect, it would depart from and put aside the statutory definition. In some of the lower courts the regulation has been held invalid. United States v. 11,150 Pounds of Butter, 195 Fed. 657, 115 C. C. A. 463, affirming (D. C.) 188 Fed. 157; Baldwin Co-operative Creamery Association v. Williams (D. C.) 233 Fed. 607; Henningsen Produce Co. v. Whaley, (D. C.) 238 Fed. 650. But in Coopersville Cooperative Creamery Co. v. Lemon, 163 Fed. 145, 89 C. C. A. 595, it was held valid. We think that decision fails to take into account and give proper weight to the conflict between the act and the regulation. See Field v. Clark, 143 U. S. 649, 12 Sup. Ct. 495, 36 L. Ed., 294; United States v. Eaton, 144 U. S. 677, 12 Sup. Ct. 764, 36 L. Ed. 591; In re Kollock, 165 U. S. 526, 17 Sup. Ct. 444, 41 L. Ed. 813; Buttfield v. Stranahan, 192 U. S. 470, 24 Sup. Ct. 349, 48 L. Ed. 525; Williamson v. United States, 207 U. S. 425, 28 Sup. Ct. 163, 52 L. Ed. 278; United States v. Grimaud, 220 U. S. 506, 31 Sup. Ct. 480, 55 L. Ed. 563. It must be held that the regulation is invalid.

The act does not prescribe any standard for moisture in butter. In its manufacture, the variation of moisture ranges above as well as below the quantities found in the butter in question, and its moisture content cannot be said to be 'abnormal.' It was made in the usual way. There was no process or material used with intent or effect of causing absorption of abnormal quantities of moisture. It was not adulterated within the meaning of the act.

Judgment affirmed.