The Delhi High Court on Friday criticized restaurant associations. They were charging service fees on food bills. This occurred even when consumers were already paying inflated prices for pre-packaged goods.
A Division Bench comprised Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela. They heard appeals by the National Restaurant Association of India (NRAI) and the Federation of Hotels and Restaurant Associations of India (FHRAI). These appeals challenge a single-judge ruling. The ruling declared that service charge collection is illegal.
The Bench pressed the associations to justify the practice, observing:
“When you are charging ₹100 for a ₹20 water bottle, why should the customer also pay a service charge? You are charging more than the MRP for the ambience and experience of dining. Then why again a service charge for the same service?”
The judges further cautioned that such practices could not continue unchecked. They sought clarification on how restaurants could levy GST on service charges. The Court directed the standing counsel for the GST department to be present on the next hearing date, September 22.
Earlier, on March 28, a single judge upheld the guidelines issued by the Central Consumer Protection Authority (CCPA). These guidelines prohibit hotels and restaurants from automatically adding service charges to food bills. Justice Prathiba M Singh had also imposed ₹1 lakh costs on the associations for challenging the guidelines.
The CCPA’s 2022 guidelines had clarified that service charge was voluntary, optional, and solely at the consumer’s discretion.
The Delhi High Court will now continue hearing the appeal on September 22.
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