Okay. This is VERY VERY weird. If a sysadmin can explain to me how this could happen that would be nice.
It WORKS ONLY IF I go to the control panel -> sound(large icon) -> Recording tab.
The moment I go the recording tab. IT WORKS LIKE MAGIC. The moment I close the sound settings, The headphones STOP WORKING. This is incredibly weird. Try it out to see if it works.