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Levy of Service Charge: “Don’t pay. Don’t enter the restaurant. It’s a matter of choice”

November 10, 2022
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The Central Consumer Protection Authority (CCPA) on July 4, 2022 issued Guidelines to prevent unfair trade practices and protection of consumer interest with regard to levy of service charge in hotels and restaurants[1]. In a subsequent development, the Hon’ble Delhi High Court presided by Hon’ble Mr. Justice Yashwant Varma in the case of National Restaurant Association of India and Ors. V. Union of India and Anr.[2], vide order dated July 20, 2022 has stayed the operation of the CCPA Guidelines prohibiting levy of service charge by hotels and restaurants.

The stay order has been granted in favour of the Petitioners subject to fulfilment of following twin- mandatory conditions –

  1. Desist from levying or including service charge on any “take away” items;
  2. Ensuring that the levy of service charge in addition to the price and taxes and obligation of customer to pay the same is duly and promptly displayed on the menu or other places;

National Restaurant Association of India and Ors. V. Union of India and Anr.

The matter came up for the Court’s consideration when the National Restaurant Association of India[3] approached the Delhi High court challenging the CCPA guidelines.

The Court while delivering its judgement relied upon the judgments rendered by the National Consumer Disputes Redressal Commission (NCDRC) in the case of Nitin Mittal vs. Pind Balluchi Restaurant[4] and S. S. Ahuja vs. Pizza Express[5], wherein it was observed by the Commission that pricing of food products is in the discretion of restaurants and the consumer courts shall refrain from interfering in such matters. It was also opined in these cases that it is a proposal from the restaurants to the customers to accept the same or not.

The Commission opined that there has to be some difference in price in respect of food served in the restaurant itself and packed food. For the food which is served in the restaurant itself, the owner of restaurant has to incur money for furniture, carpets, air-conditioners, fans, waiters, maintenance of reception etc.; for packed food, there is no need to give such services.

Taking into account the aforementioned decisions, the Hon’ble Delhi High Court noted that the matters require consideration and therefore, stayed the operation of the impugned CCPA guidelines dated July 04, 2022 and slated the matter for further hearing on November 25, 2022.

Highlights of the new CCPA Guidelines

The Central Consumer Protection Authority issued the following guidelines-

  1. No hotel or restaurant shall add service charge automatically or by default in the bill.
  2. Service charge shall not be collected from consumers by any other name.
  • No hotel or restaurant shall force a consumer to pay service charge and shall clearly inform the consumer that service charge is voluntary, optional and at consumer’s discretion.
  1. No restriction on entry or provision of services based on collection of service charge shall be imposed on consumers.
  2. Service charge shall not be collected by adding it along with the food bill and levying GST on the total amount

Read more about CCPA Guidelines issued to prevent unfair trade practices and protection of consumer interest with regard to levy of service charge in hotels and restaurants here

[1] https://ssrana.in/articles/hotels-and-restaurants-barred-from-levying-service-charge/

[2] W.P.(C) 10683/2022

[3] The National Restaurant Association of India is a restaurant industry business association in India which represents about 500000+ restaurants and hotels in India.

[4] Revision Petition No. 1999 of 2012

[5] I (2003) CPJ 57 MRTP

 

 

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