§ 195.156 DISTILLATION Production of low wines. All processes of distillation shall be conducted in the distilling department of the alcoholic vinegar factory. The vapor separated from the mash produced must be condensed by introducing the vapor into the water or other liquid used in making vinegar. The vapor must not be condensed before or without infusion into such water or other liquid. (68A Stat. 640; 26 U. S. C. 5216) § 195.157 Conversion of vapor into distilled spirits forbidden. No gooseneck, pipe, reflux line, conductor, or contrivance of any description whatever, whereby vapor might in any manner be conveyed away and converted into distilled spirits (other than low wines for the manufacture of vinegar), shall be used or employed, or be fastened to, or connected, with, any vaporizing apparatus used for the manufacture of vinegar. The alcoholic vapor shall not be conducted in any manner, or by any contrivance, into a receptacle where it could be condensed by itself or with a small or limited quantity of water and so become distilled spirits exceeding 30 degrees in proof. (68A Stat. 640; 26 U. 8. C. 5216) § 195.158 Test of condensing material. The water or other liquid used as the recipient of the alcoholic vapor should be frequently tested to see that the proof of the liquid is not raised above 30 degrees. § 195.159 Deposit of low wines in receiving tanks. All low wines produced shall be promptly conveyed to the receiving tanks. The receiving tanks must be so arranged that each day's production may be ascertained, and the amount shall be recorded daily by the proprietor on the records required by § 195.175. Where the production of more than one day is run into the same tank the operation must be so conducted that the production of a full day or more may be measured. The quantity noted as the production of a particular date must be the quantity actually produced on that date. [20 F. R. 2356, Apr. 12, 1955, as amended by T. D. 6221, 22 F. R. 111, Jan. 4, 1957] § 195.160 Gauge prior to removal. The low wines may be transferred by pipeline from the receiving tanks to low wine storage tanks, or direct to the vinegar factory proper for use in the manufacture of vinegar. The quantity thus removed or used must be determined and recorded by the proprietor on the records required by § 195.175. [20 F. R. 2356, Apr. 12, 1955, as amended by T. D. 6221, 22 F. R. 111, Jan. 4, 1957] § 195.161 LOSSES In receiving or storage tanks. The quantity of low wines lost in receiving or storage tanks must be determined and reported in the proprietor's monthly report, Form 1623. [20 F. R. 2356, Apr. 12, 1955, as amended by T. D. 6221, 22 F. R. 111, Jan. 4, 1957] § 195.162 Allowance for loss. Where the loss of low wines during any calendar month does not exceed 1 percent of the aggregate quantity of low wines on hand the 1st of the month and produced during the month, application for the allowance of such loss will not be required to be filed by the proprietor, provided there are no circumstances indicating that the low wines lost, or any part thereof, were unlawfully used or were unlawfully removed. Where such loss exceeds 1 percent, application for remission of tax on the total losses during the month shall be filed by the proprietor with the assistant regional commissioner. Such application shall be signed by the proprietor or his authorized agent and immediately above the signature there shall appear the following statement: "I declare under the penalties of perjury that this application has been examined by me and to the best of my knowledge and belief is a true and correct application." Such allowance of 1 percent shall apply to the losses for each month, which must be determined separately. § 195.163 Losses not cumulative. The allowance of 1 percent during any one month on account of losses of low wines in receiving and storage tanks shall not be cumulative. § 195.164 Time for filing application. Application for allowance on account of losses must be made within 10 days after the end of the month during which the losses occurred for which allowance is requested. Each application for allowance of losses must set out all the material facts relating to the loss, and must state particularly the nature and cause thereof; i.e., whether by leakage, evaporation, theft, casualty, or other unavoidable cause, as well as the extent of the loss. The application must be accompanied by affidavits of persons having personal knowledge of the facts. § 195.165 Taxes must be paid on distilled spirits illegally produced or removed. The internal revenue taxes must be paid on any distilled spirits produced in or removed from the premises of a vinegar plant in violation of law or this part. (72 Stat. 1391; 26 U.S.C. 5505) [T.D. 6397, 24 F.R. 5710, July 16, 1959] REMOVAL AND TESTING OF VINEGAR § 195.166 Sale or removal of vinegar or other fluid or material containing spirits. No person shall remove, or cause to be removed, from any vinegar plant established under this part any vinegar or other fluid or material containing a greater proportion than 2 percent of proof spirits. (72 Stat. 1391; 26 U.S.C. 5504) [T.D. 6397, 24 F.R. 5710, July 16, 1959] § 195.167 Test of vinegar. The vinegar removed from vinegar factories should be tested from time to time to ascertain if it contains any greater proportion of proof spirits than is permitted by law. Subpart L-Proprietor's Records and Reports duction of finished vinegar, and to ascertain whether there has been compliance with all internal revenue laws and regulations relating thereto, and (2) to provide the proprietor with records for compiling his monthly report on Form 1623. Such records shall clearly and accurately reflect the following: (a) The receipt and disposition of each lot of fermenting or distilling material. (b) The kind and quantity of fermenting material used, the quantity of mash set, and the quantity of distilling material produced (serial numbers of fermenters shall be shown on such records). (c) The quantity of distilling material used, and the quantity of low wines produced. (d) The quantity of vinegar produced. (e) The quantity of vinegar removed (including losses). In addition to any other information shown therein, the records shall show the date of each transaction or operation and, where applicable, the identity of each consignor and consignee. Quantities of fermenting materials shall be given in terms of pounds of dry measure and wine gallons of liquid measure. Quantities of low wines shall be given in terms of proof gallons. Quantities of vinegar shall be given in terms of gallons of 100-grain strength. All information required to be shown in the daily records required by this section shall be assembled or entered, as the case may be, by the close of the business day next succeeding the day on which the transaction occurs. The assistant regional commissioner may require additional information which he considers necessary. [T. D. 6221, 22 F. R. 111, Jan. 4, 1957] § 195.176 Monthly report, Form 1623. At the end of each month the proprietor shall prepare a report on Form 1623, in duplicate, showing a monthly summary account of fermenting and distilling materials, low wines, and vinegar. On or before the 10th day of the succeeding month, the proprietor shall forward the original to the assistant regional commissioner and retain the duplicate. [T. D. 6221, 22 F.R. 112, Jan. 4, 1957] § 195.177 Filing and retention of records and reports. All records required to be maintained by this part, and legible copies of all reports submitted to the assistant regional commissioner, shall be filed and maintained by the proprietor for a period of not less than two years in such manner as to facilitate inspection by internal revenue officers. Records and reports shall be available during regular business hours for examination and taking of abstract therefrom by internal revenue officers. [T. D. 6221, 22 F. R. 112, Jan. 4, 1957] Subpart M-Suspension and Resumption of Operations § 195.185 Suspension. Any proprietor of a vinegar factory desiring to suspend operations in connection with the production and use of low wines for an indefinite period, or for a definite period exceeding 15 days, shall give notice to such effect, in triplicate, to the assistant regional commissioner, stating when he will suspend operations. The giving of such notice will not be required where operations are temporarily suspended. The proprietor will fix in the notice the time when all fermented distilling material will be distilled and all low wines will be used. § 195.186 Registry of stills, Form 26. When operations are suspended, the stills used for the production of low wines must be registered on Form 26, in triplicate, in accordance with the provisions of 195.195. (68A Stat. 628; 26 U. S. C. 5174) § 195.187 Resumption. No proprietor of a vinegar factory may carry on the business of distilling low wines after the time stated in his notice of suspension until he shall have given another notice, in triplicate, to the assistant regional commissioner, stating the time when he will resume work. The stills must be registered in conformity with § 195.195. Subpart N Registry of Stills § 195.195 Registry on Form 26. Every person having in his possession or custody, or under his control, any still or distilling apparatus set up and intended to be used for the distillation of distilled spirits in the manufacture of vinegar by the vaporizing process, must register the same on Form 26, in triplicate, with the assistant regional commissioner for the region in which it is located. The temporary suspension of a vinegar plant does not necessitate re- Subpart O-Change of Persons § 195.200 Completion of operations required. When a succession, or actual change, in the person or persons operating the vinegar factory shall take place, other than a change brought about by operation of law, as by the appointment of an administrator, executor, receiver, trustee, assignee, or other fiduciary, the business of producing and using low wines must be completely finished by the person or persons who have been carrying on the business, and the operations suspended before the business shall be undertaken or begun by the successor, unless by agreement of the predecessor and the successor it shall be arranged to transfer from the former to the latter at midnight on a certain day all low wines and all materials to be used in the manufacture of low wines in the vinegar factory at that hour; and provided that in either case the application and other qualifying documents of the successor prescribed by this part have been approved, to take effect on the day next succeeding that at the close of which the transfer is made. Such documents should, therefore, be submitted to the assistant regional commissioner in sufficient time to permit such approval for the date desired. The successor shall not commence operations until all documents required for his qualification have been approved by the assistant regional commissioner. [20 F.R. 2356, Apr. 12, 1955, as amended by T.D. 6397, 24 FR. 5710, July 16, 1959] 195.201 Requirements as to prede cessor. In accordance with the provisions of subpart P the predecessor must file Form 27-F, notice of suspension, and Form 26, registering the stills in his name, in accordance with § 195.195, and there shall be stated the name of the successor in proprietorship in accordance with the instructions printed on the forms. (68A Stat. 628; 26 U.S.C. 5174) § 195.202 Reports and records. The predecessor shall report on his Form 1623 all fermenting or distilling materials, materials in process, and low wines transferred to his successor, who shall in turn report such items on his Form 1623 as received from his predecessor. The predecessor will make appropriate notation on all forms and records required to be kept by him showing the change in proprietorship of the vinegar factory and the date thereof. [20 F.R. 2356, Apr. 12, 1955, as amended by T.D. 6221, 22 F.R. 112, Jan. 4, 1957] § 195.203 Succession by fiduciary. Where a change in proprietorship is brought about by operation of law, the administrator, executor, receiver, trustee, assignee, or other fiduciary, may not commence or complete operations until the required qualifying documents have been filed and approved. The fiduciary will make appropriate notation on Form 1623, and the records required by § 195.175, of his succession and the date thereof. [20 F. R. 2356, Apr. 12, 1955, as amended by T. D. 6221, 22 F. R. 112, Jan. 4, 1957] Subpart P-Discontinuance of Upon permanent discontinuance of business, and prior to the filing of Form 27-F, Form 26, and notice of suspension, as prescribed in §§ 195.185 and 195.186, all distilling materials, low wines, and vinegar must have been disposed of. All fermenting and distilling materials, low wines, and vinegar must be accounted for on Form 1623, the original of which must be marked "Final report, permanent discontinuance of business," and must be submitted to the assistant regional commissioner. [20 F. R. 2356, Apr. 12, 1955, as amended by T. D. 6221, 22 F. R. 112, Jan. 4, 1957] § 195.211 Application, Form 27-F. When all distilling materials, low wines, and vinegar have been lawfully disposed of, the proprietor shall file Form 27-F, in triplicate, with the assistant regional commissioner, stating the purpose of the filing thereof to be "Permanent discontinuance of business.” [20 F.R. 2356, Apr. 12, 1955, as amended by T.D. 6397, 24 FR. 5710, July 16, 1959] § 195.212 Registry of stills, Form 26. All distilling apparatus must be registered on Form 26 with an explanatory note that the proprietor is permanently discontinuing business. Some essential portion of the distilling apparatus shall be removed to a safe place of storage pending the final dismantling and disposition of the apparatus. (68A Stat. 628; 26 U.S.C. 5174) Subpart Q-General Provisions Relating to Vinegar Factories §§ 195.220-195.221 [Reserved]. § 195.222 Inspection of records and premises. All records and reports kept and filed under the provisions of this part and all liquid or property to which such records or reports relate shall be subject to inspection at any reasonable hour by any internal revenue officer. Internal revenue officers may take samples of low wines and vinegar, or of products manufactured with vinegar, whether at the place of manufacture or on trucks or other conveyances leaving the place of manufacture. EXCEPTIONS TO REQUIREMENTS § 195.224 Exceptions to construction and equipment requirements. The Director, Alcohol and Tobacco Tax Division, may approve details of construction and equipment in lieu of those specified in this part where it is shown that it is impracticable to conform to the prescribed specifications, and the proposed construction and equipment will afford as much or more security and protection to the revenue as is intended by the specifications prescribed in this part and where such variations will not be contrary to any provision of law. Where it is proposed to substitute construction and equipment for that for which specifications are prescribed, prior approval must be obtained in accordance with the provisions of § 195.226. (68A Stat. 680; 26 U. S. C. 5552) § 195.225 Exceptions to methods of operation. The Director, Alcohol and Tobacco Tax Division, may, in case of emergency, approve methods of operation other than those provided for by this part, where it is shown that variations from the requirements are necessary, will not hinder the effective administration of this part, will not jeopardize the revenue, and where such variations are not contrary to any provision of law. Where it is proposed to employ methods of operations other than those provided for by this part, prior approval must be obtained in accordance with the provisions of § 195.226. (68A Stat. 680; 26 U. S. C. 5552) § 195.226 Application. A proprietor who proposes to employ methods of operations or construction or to install equipment, other than as provided in this part, shall submit a letterhead application so to do, in triplicate, to the assistant regional commissioner. Such application shall describe the proposed variations and state the need therefor. Where variations in construction and equipment cannot be adequately described in the application, drawings or photographs shall also be submitted. The assistant regional commissioner will make such inquiries as are necessary to determine the necessity for the variations and whether approval thereof will hinder the effective administration of this part or result in jeopardy to the revenue. On completion of the inquiry, the assistant regional commissioner will forward two copies of the application to the Director, Alcohol and Tobacco Tax Division, together with a report of his findings and his recommendation. (68A Stat. 680; 26 U. S. C. 5552) Subpart R-Inspection of Vinegar § 195.235 Entry of vinegar factory or premises used in connection therewith. Under the law, any internal revenue officer may at all times, as well by night as by day, enter any vinegar factory or building or place used for the business of distilling or used in connection therewith for storage or other purposes, and, if not admitted upon demand, having declared his name and office, he may break open any doors or windows or break through any of the walls of such prem Under the law, any internal revenue officer, and any persons acting in his aid, may break up the ground on any part of the vinegar factory or premises of a vinegar maker, or any wall or partition thereof or belonging thereto, or other place, to search for any pipe, cock, private conveyance, or utensil, and upon finding any pipe or conveyance leading from or to the vinegar factory premises, to break up any ground, house, wall, or other place through or into which such pipe or conveyance leads, and to break or cut away such pipe or other conveyance. (68A Stat. 636, 640; 26 U. S. C. 5196, 5216) § 195.237 Proprietors to furnish sistance. as Under the law, on demand of any internal revenue officer, every vinegar maker shall furnish convenient ladders to enable the officer to examine any vessel or utensil in his vinegar factory, and shall furnish all assistance, lights, tools, or other things necessary for inspecting the premises and apparatus, and shall open all doors, boxes, packages, and all casks, barrels, tanks, and other vessels. (68A Stat. 636, 640; 26 U. S. C. 5196, 5216) Subpart S-Losses § 195.245 Investigation by assistant regional commissioners. Where large losses of low wines are reported by the proprietors of vinegar factories, the assistant regional commissioner will immediately make such investigation and require such evidence to be submitted as he may deem necessary, and will allow or disallow the loss in accordance with existing law and regulations. § 195.246 Examination of reports of proprietors. Upon receipt of a report rendered by a proprietor of a vinegar factory for the month the assistant regional commissioner will examine such report to determine whether the proprietor has accounted for all the low wines produced by him during the month. If the assistant regional commissioner finds that the |