The Paragon Jewel Coal Co., Inc. v. Commissioner of Internal Revenue case in 1964 revolved around the issue of tax deductions for coal mining companies. The Supreme Court ruled against Paragon Jewel Coal Company, which had claimed a depletion deduction on its federal income taxes based on the sale price of coal at the mine mouth (the point where it is ready to be shipped), rather than at an earlier stage when it was removed from the ground and not yet processed or cleaned. The court held that "gross income from mining" should be calculated after processing costs were deducted, but before transportation costs were subtracted - meaning that these expenses could not be included in calculating depletion allowances for tax purposes.

In the dissenting opinion for Paragon Jewel Coal Co., Inc. v. Commissioner of Internal Revenue, Justice Harlan disagreed with the majority's interpretation of tax law and its application to coal mining companies like Paragon Jewel Coal Co. He argued that the majority had misinterpreted Section 613 of the Internal Revenue Code which provides a percentage depletion allowance for certain minerals including coal. According to him, this provision was intended by Congress as a form of capital recovery for miners who exhaust their mineral resources over time; it wasn't meant to provide an additional profit center beyond normal business operations or serve as a subsidy from taxpayers at large. The justice also criticized how his colleagues applied this provision in practice, stating they allowed deductions far exceeding any potential capital investment made by these companies into their mines - effectively turning what should be a limited tax relief measure into an unwarranted windfall gain.