Hotel And Restaurants Can’t Levy Service Charge! Delhi High Court’s bid ruling came on Friday. The court had said that the hotels and restaurants cannot automatically add service charge to their bills. The court viewed that levying service charge to the food bill is business run on wrong way. High court apprehended the rules of the Central Consumer Protection Authority (CCPA). Justice Pratibha M Singh said that it is the customer’s choice to pay service charge or tip. It cannot be collected forcibly.
In July 2022, CCPA had made some rules which states about the levying service charge in hotel/restaurants bills. The court stated that businesses cannot legally charge for services and must protect customer rights. It emphasized that customer rights take precedence. The CCPA holds the authority to safeguard customer rights and establish regulations accordingly.
What Is CCPA
The Central Consumer Protection Authority (CCPA), established under the Consumer Protection Act, 2019, regulates matters related to consumer rights violations, unfair trade practices, and misleading advertisements that harm consumers. The body has the power to issue directions to traders, manufacturers, endorsers, and advertisers to prevent unfair trade practices and protect consumer interests. The CCPA has imposed penalties on coaching institutes for making misleading advertisements about their success rates in civil services examinations. The court said that the rights of the customers are paramount. CCPA is the protector of the rights of the customers and has the right to make rules. The court also said that CCPA is not just an advisory body, but it can make rules for the rights of the customers.
What Hotel Association Said In The Court
The National Restaurant Association of India and the Federation of Hotels and Restaurant Associations (FHRAI), who appeared in court, argued that levying service charges in hotel and restaurant bills is not wrong. According to them, businesses worldwide follow this practice, which does not result in unfair treatment of customers. They also stated that restaurants have long implemented service charges and clearly mention them on menu cards and within their establishments.
They also criticized the CCPA rules, calling them unjust and arguing that the authority has no right to ban service charges. Additionally, they contended that CCPA regulations should serve only as advisory guidelines. Restaurant owners defended the service charge, stating that it benefits restaurant employees and is their rightful due. However, the CCPA maintained that imposing a service charge on food bills is inappropriate, as no additional service is provided to customers in exchange for it.
