Service charge

Hotels, restaurants with service charge: Centre, CCPA in Delhi HC

New Delhi, August 31: The Center and Central Consumer Protection Authority (CCPA) told the Delhi High Court on Wednesday that hotels and restaurants were collecting service charges on food bills while blatantly flouting the guidelines prohibiting collection.
They claimed that consumers unwittingly pay service fees even when they are dissatisfied with the services.
Arguments were made by authorities in their application for cancellation of stays granted by the High Court over the July 4 CCPA guidelines prohibiting hotels and restaurants from levying service charges on food bills.
Judge Yashwant Varma was told that the Center and the CCPA had also filed their counter-affidavits in response to petitions challenging the CCPA’s July 4 guidelines that angered hotel and restaurant owners.
The court asked the lawyers of the two authorities to put the documents on file, after which the petitioners – National Restaurant Association of India (NRAI) and Federation of Hotels and Restaurant Associations of India can file their responses.
The court scheduled the case for a rehearing on October 6.
The single judge had issued an interim order on July 20 suspending the directives. Subsequently, the Center and the CCPA had challenged the order before the division chamber which asked the authorities to seize the single judge to obtain an appropriate remedy.
Authorities argued in their request to overturn the stay that they did not have sufficient time and opportunity to present their case and that the interim order was issued in a hurry.
They stated that due to these severe difficulties, consumers in general have been forced to pay service charges compulsorily without any element of discretion on their part.
“Restaurants and hotels have been observed to blatantly flout guidelines and unwittingly collect service fees from consumers, even when they are dissatisfied with services,” the app says, adding that after the publication July guidelines, another 1,105 complaints were registered by consumers on the National Consumer Helpline about the unfair collection of service charges by hotels and restaurants.
The plea said that the guidelines were issued to protect the rights and interests of consumers and are intended to protect them against unfair business practices and violation of consumer rights due to mandatory collection of service fees.
He said the service charge was added automatically or by default in the food bill without giving consumers the choice or discretion to decide whether they want to pay the charge or not.
He insisted that the guidelines do not interfere with the right of restaurants or hotels to set the prices at which they want to offer their food and services to consumers they are free to decide.
The plea claimed that the restaurant associations sought to mislead the court by falsely claiming that service charges were in vogue all over the world, which is far from the truth.
Calling for the dismissal of the petitions by the hotel and restaurant associations, the CCPA, in its counter affidavit, said the petitioners have utterly failed to appreciate the rights of consumers whose hard-earned money is unjustly collected automatically or by default on behalf of service charges.
“The inclusion of the service charge in the bill automatically or by default cannot be considered a binding contract between the consumer and the restaurant,” he said.
The CCPA affidavit added that the purpose of charging a mandatory service charge on top of food prices and applicable taxes is “unlawful” because no proportionate service is separately provided to consumers.
The mandatory imposition of service fees would run counter to the provisions of the Consumer Protection Act, because the money is collected from consumers without giving them the choice or discretion to decide whether they want to pay it, said the CCAC.
The court in an earlier hearing questioned why restaurants should collect the service charge from consumers as an ‘additional’ and ‘separate’ levy, noting that a common man perceives it as a levy governmental.
The court had said that restaurants could raise their food prices to absorb this charge instead of recouping it as an additional charge on top of the total bill.
The Single Judge had on July 20 declared that the stay is subject to the applicants ensuring that the levy of the service charge, in addition to the price and taxes, and the customer’s obligation to pay them are duly and prominently displayed. on the menu or other places.
In addition, the members of the applicant associations will also undertake not to levy service charges on takeaway meals, the court had indicated in its July 20 order.
The NRAI argued before the single judge that the CCPA’s ban under the July 4 order was “arbitrary, untenable and should be overturned” because it was imposed without appreciation of the facts and circumstances.
“The collection of service charges has been a common practice in the hospitality industry for over 80 years, which is evident from the fact that the Supreme Court took cognizance of this concept in 1964,” the petition stated.
“The collection of service fees also has a socio-economic aspect. The service charge collection system ensures a systematic and logical distribution of service charge collection among employees and not just the employee serving the customer in the restaurant. This ensures that benefits are distributed equally among all staff, including utility workers and support staff,” he added. (PTI)