On Wednesday, the Delhi High Court issued an order prohibiting restaurant operators from misrepresenting to customers that the court has finally approved the service charge by including the court’s interim ruling about a service charge on their menu cards or display boards.
The charge did not appear to be a tax, therefore the court requested that they offer a better wording for it.
Justice Pratibha Singh noted in the course of Wednesday’s hearing that “for a long time, most of us thought that the service charge was being taken by the government. That is where the problem is because people think that a service charge is like a service tax. A consumer doesn’t know the difference between service tax, Goods and Services 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.
The bench asked the restaurant owners to discuss the matter with each other and find out if the existing “service charge” can be replaced with another phrase, such as a “fund” or a “staff welfare charge,” so it does not sound like a government levy.
Justice Singh also observed Additional Solicitor General Chetan Sharma’s claim on behalf of the CCPA. The Central Consumer Protection Authority (CCPA) claimed that restaurants were “misinterpreting” the high court’s “interim order” and showing it as if the court had imposed the service charge.
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After Sharma posted images boards displayed by restaurants referencing the high court decision, Justice Singh added, “It is clarified that the interim order shall not be shown on the display board or menu card in a manner to mislead the consumer that the service charge has been approved by this court”.
Even after it has been claimed by the group of restaurants that it is a standard exercise in the hospitality business, the government and consumer bodies have been considering service charges illegal for years. When the CCPA published a statement on July 4, 2022, stopping restaurants from automatically adding service fees to food bills, the authority cleared its stand.
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On July 20, 2022, following appeals filed by the National Restaurant Association of India (NRAI) and the Federation of Hotel and Restaurant Associations of India (FHRAI), the high court put the CCPA order on hold. The CCPA questioned the ruling, asking that Justice Yashwant Varma’s single-judge bench order be in “haste” and not even give them enough time to present their point.
The case was remitted and handed back to a single judge by the division bench.
Justice Singh ordered the NRAI and FHRAI during the hearing on Wednesday to produce affidavits within two weeks that detail the proportion of their members who levy the service charge as an obligatory scenario on food bills and members who support its petitions.
The court ordered orally, “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”.
