2001 (8) TMI 1343 - AT - VAT and Sales Tax

Summary

Issues:
1. Classification of garments as "garments made to order" or "readymade garments".
2. Applicability of the principle of res judicata in the case.

Analysis:
1. Classification of Garments:
The petitioner, a manufacturer of readymade garments for sale to the defence authority, challenged the orders treating the garments as "garments made to order" instead of readymade. The petitioner argued that the garments were always considered readymade by the Revenue, as they were not customized for individual customers but made in bulk for a specific group. The court defined readymade garments as those made in standard sizes for general market sale, not tailored to individual measurements. It noted that garments made for specific groups like defence personnel, even if not custom-fit, are made according to specific orders and not for general market display. The court upheld the authorities' classification of the garments as "garments made to order" based on these distinctions.

2. Principle of Res Judicata:
The petitioner invoked the principle of res judicata, arguing that since the Revenue had consistently levied tax at 3%, accepting the garments as readymade, it should not be allowed to change the classification. The court considered precedents emphasizing finality in legal proceedings and the need to prevent reactivation of stale issues. It concluded that the question of whether the garments were readymade or not had been settled by the Revenue's past actions and should not be revisited. Applying the principle of res judicata, the court set aside the orders treating the garments as "garments made to order" and upheld the petitioner's classification as readymade, maintaining the tax rate at 3%.

In conclusion, the court upheld the classification of the garments as "garments made to order" and determined that the principle of res judicata prevented the Revenue from changing the tax rate based on past acceptance of the garments as readymade. The application was allowed, setting aside the previous orders and maintaining the tax rate at 3% for the petitioner's readymade garments sold to the defence authority.