Service Charge: Delhi High Court Directs Restaurants To Not Mislead Consumers

The Delhi High Court on Wednesday asked hotels and restaurants to refrain from exhibiting that service charge is being levied on consumers on the basis of court approval.

The high court was hearing the petitions filed by the National Restaurant Association of India and Federation of Hotels and Restaurants Association of India against the guidelines prohibiting levy of service charge.

The bench comprising Justice Prathiba M Singh said that the high court's stay order on the Central Consumer Protection Authority, which prohibits levying of service charge, should not be shown on display boards in a way to mislead consumers into believing that the service charge has been approved by the Delhi High Court.

Justice Singh also asked the associations to put forth an affidavit showing the percentage of their members who levy a service charge as an essential component of the bill. The response would aid in deciding whether such members would have an issue with changing the term "Service Tax" along the lines of "staff welfare fund", the high court said.

CCPA guidelines prohibit restaurants and hotels from levying service charge. These were challenged by both the associations in July last year and consequently, a coordinate bench of the high court stayed the guidelines.

The central government had asked the court to look into the matter and said that the guidelines are for the benefit of consumers. The government had also sought vacation of the stay on the guidelines. The court had declined the request saying all parties needed to be heard first.