Garments made to order and settled tax classification cannot ordinarily be reopened when facts remain unchanged.

Garments supplied to a defence authority are classified by their real nature in common parlance: items made to specifications for a particular class of users, and not produced for general market sale in standard sizes, are treated as garments made to order rather than readymade garments. In tax matters, res judicata does not strictly apply, but a classification consistently accepted over a long period should not ordinarily be reopened when the underlying facts remain unchanged. The commentary also states that settled fundamental aspects should not be reactivated as stale controversies, and that reassessment at a higher rate is unjustified where the factual position has not changed.

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Issues: (i) Whether the garments manufactured and supplied to the defence authority were "garments made to order" or "readymade garments"; (ii) Whether the principle of res judicata barred the Revenue from reopening the classification and rate of tax.

Issue (i): Whether the garments manufactured and supplied to the defence authority were "garments made to order" or "readymade garments"

Analysis: The expression "readymade" was not defined in the statute and had to be understood in its common parlance sense. Readymade garments are ordinarily made beforehand in standard sizes for sale in the open market, without being tailored to an order. By contrast, garments manufactured to the specifications of a particular class of users, such as defence personnel, are made pursuant to an order and not according to the manufacturer's own choice of design, colour, or fashion. Such goods are not displayed for general sale and are made only when the order is received.

Conclusion: The garments supplied to the defence authority were garments made to order and not readymade garments, and the finding against the assessee on this issue was upheld.

Issue (ii): Whether the principle of res judicata barred the Revenue from reopening the classification and rate of tax

Analysis: Though res judicata does not strictly apply to tax proceedings, a settled fundamental aspect which has been accepted over a long period and not challenged should not ordinarily be reopened in a subsequent year. The classification of these garments had consistently been accepted by the Revenue as readymade garments and tax had been levied accordingly. In the absence of any change in the factual position, the issue had attained finality and could not be reactivated as a stale controversy.

Conclusion: The Revenue was barred from reopening the issue, and the reassessment at the higher rate could not stand.

Final Conclusion: The impugned orders were set aside and the application was allowed, with the assessee succeeding on both classification and finality grounds.

Ratio Decidendi: In tax matters, where the same fundamental classification has long been accepted and the underlying facts remain unchanged, the Revenue cannot reopen the settled position in a subsequent year; classification must also be determined in common parlance by the real nature of the goods.

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