Hotels and restaurants can continue to levy service charge for now: Delhi HC seeks stand of eateries

Restaurants can levy service service charge on customers for the time being, the Delhi High Court said on Thursday as it disposed of a plea by the Central Consumer Protection Authority (CCPA) against a single judge order which had stayed its guidelines prohibiting hotels and restaurants from levying service charge on bills. 

The high court also sought stand of restaurants on the appeal by the CCPA, which contended that levying of service charge is an important issue for consumers and a detailed hearing is required. To this, the court said that eateries can continue charging customers for now and posted the matter for further hearing on August 31. 

A division bench comprising Delhi HC Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad granted liberty to the CCPA to file its response before the single judge in the pleas filed by Federation of Hotels and Restaurant Associations of India and National Restaurant Association of India. 

The FHRAI had challenged the authority’s guidelines stating that levying service charge is a matter of contract and the decision of the management, and once the customer places the order after being made aware of the terms and conditions, a binding contract comes into existence. 

On Tuesday, the Delhi High Court had questioned why restaurants should recover service charges from consumers as an “additional” and “separate levy." 

The court had remarked that a common man perceives service charge as a government levy and restaurants can increase their food prices to absorb this charge instead of recovering it in the form of an additional charge over and above the total bill.

Counsels appearing for restaurants said that the government does not prohibit service charges and when it is made clear by the restaurant that there would be a levy of service charge, it becomes a matter of contract.