- The "All Sales Are Final" doesn't mean much (especially since... see next line)
- You do have on the page that you accept Returns and that it must be within 7 days.
- The item is listed both as 36x34 and 36x32
Suggestions for next time
- Take VERY clear pictures, and host on photobucket, imageshack or some other free image hosting service
- Take measurements and put them right there in your auction, you want people to ask questions if they are unsure about something, but you do not want to have to be sending pictures through email or eBay messaging, since if you took the time from the beginning and added clear pictures and measurements, you wouldn't have to go through that process.
- Having clear pictures and measurements increases the price you get for your items and reduces (not eliminates) the chances of buyer disputes.
Send the buyer a note saying "Good day, I am sorry that you are unhappy with the item, I assure you that they are in fact authentic denim; I do not buy, wear nor sell false merchandise. Since you are unhappy with the fit however, please return the item to me and I will refund you" You do not want to make this go to Paypal, because he's the buyer and has that position as the advantageous claimant and will most likely WIN and you will still have to refund him and you WILL not get your listing and paypal fees returned to you. You will have to be defending your position and it will be tough because your auction states that you accept returns although the written "All sales are final" is there, it doesn't mean much because a sale is only final if both parties agree that it is.
As a side note, how is it possible that something is BNWT and never worn, yet you came to the conclusion that they will not stretch out?