Service charge

Restaurants should not levy service charges, observes Delhi HC

The Delhi High Court on Thursday (August 18) observed that restaurants were not required to levy service charges to remunerate their employees. The Court left the Center and the Central Consumer Protection Authority (CCPA) free to seize the single stay cancellation chamber on the directives which prohibited hotels and restaurants from adding service charges alone or by default in the bill.

Listing the case early from November 25 to August 31, the divisional bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad observed, “You (the restaurants) don’t have to levy a service charge to pay your employees. You are responsible and obligated to pay your employees under various laws, it is your obligation under the law.

In addition to giving the Center and the CCPA the freedom to argue in favor of overturning the stay order issued by a single bench on July 20, the court also allowed them to present a response to the pleas of the Federation of Hotel and Restaurant Associations of India and National Restaurant Association of India (NRAI) challenging the guidelines.

The Center and the CCPA, represented by Additional Solicitor General Chetan Sharma and attorney Sandeep Mahapatra, had previously argued that the guidelines announced service charges because restaurants were free to raise their prices instead.

“The common man perceives that this is a government tax that he has to pay and if you don’t pay, the consumer is embarrassed. This has had the attention of the government since 2017. Some associations oppose it,” Sharma insisted.

Sharma also argued that it would have been reasonable if the authorities had had time to submit a response by the single bench to the pleas that challenged the CCPA guidelines. He also argued that the interim relief or stay was in the nature of final relief.

After hearing petitions from the NRAI and the Federation of Hotel and Restaurant Associations of India last month, Judge Yashwant Varma suspended the CCPA guidelines. The guidelines were suspended on the condition that union members ensure that the levying of service charges in addition to price and taxes and the obligation of the customer to pay them “are duly and prominently displayed on the menu or other places”. ”.

The Center and the CCPA, in their appeal to the Division Bench, had argued that the guidelines were issued to stop the infringement of the rights of consumers who were forced to pay default service charges without giving them the opportunity to decide.