 "Service charge")
The Delhi High Court on Wednesday said that its interim order staying the guidelines of CCPA (Central Consumer Protection Authority) that prohibits eateries from levying service charge should not be used to mislead consumers into thinking that the service charge has been approved by the court.
Justice Prathiba M Singh, who was hearing petitions filed by the National Restaurant Association of India (NRAI) and the Federation of Hotel and Restaurant Associations of India (FHRAI), asked the associations to tell the court how many eateries are willing to inform consumers that service charge is not mandatory.
The associations had challenged the CCPA guidelines of July 4, 2022, which said restaurants and hotels cannot levy service charges by default on food bills.
The court also told the associations to consider using a different term for ‘service charge’ such as ‘staff welfare fund’ or ‘staff welfare contribution’ to differentiate it from a government-imposed charge/tax.
The associations have been asked to file their reply by the next date of the hearing (July 24).
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“The affidavit shall also indicate the percentage of members who are willing to inform the consumers that the service charge is not mandatory and they can contribute voluntarily,” the court said.
Additional Solicitor General Chetan Sharma, appearing for CCPA, submitted that the interim order of the court was being misrepresented by restaurants to legitimise the levy of service charge.
“People think service charge is like a service tax. A consumer doesn’t know the difference between service tax, GST, etc, because people think it is being taken by the government. I have come across a lot of people who think like that,” Justice Singh observed.
Background
The Delhi High Court on July 21 last year stayed the guidelines issued by Central Consumer Protection Authority (CCPA) saying that restaurants and hotels cannot levy service charges by default on food bills.
The court said paying the charge is a matter of choice. "If you don’t want to pay, don't enter the restaurant. It is a matter of choice,” Justice Yashwant Varma remarked.
The Court also said there will be no service charge on takeaway food orders.
However, food outlets should display that they are levying such charges clearly on their menus so that customers know, the court said.
The CCPA, which comes under the Ministry of Consumer Affairs, issued rules on July 4 for preventing unfair trade practices and violation of consumer rights with regard to the hotels and restaurants levying service charges.
The guidelines stated that no customer should be forced to pay the service charge against their will. It stated:
• Service charge should not be levied by renaming it as some other charge
• Hotels or restaurants cannot force a customer to pay the service charge and clearly state that such charges are optional.
• Customers should not be denied entry into a food establishment based on their decision to not pay the service charge
• GST should not be levied on the combined food bill and the service charge.
The NRAI, which represents over 500,000 restaurants in the country, had said CCPA'd guidelines had no legal basis.
