CCPA Takes Action Against 27 Restaurants for Illegal Levy of
Mandatory Service Charge
Ø Mandatory Levy of Service Charge by Restaurants Violates Consumer Law: CCPA
Ø Automatic Addition of Service Charge Declared Unfair Trade Practice
Ø Penalties imposed up to ₹50,000; restaurants directed to refund service
charge and modify billing systems
Ø Action triggered by consumer complaints on National Consumer Helpline (NCH)
supported by invoices
·
Suo motu action: The Central Consumer Protection Authority
(CCPA) initiated action against 27
restaurants nationwide for unfair trade practices related to
mandatory service charge under the Consumer Protection Act, 2019.
·
Legal backing: The move follows the Delhi High Court judgment (28 March
2025), which upheld CCPA’s 2022 Guidelines and ruled that
compulsory service charge by restaurants is illegal.
·
Key guidelines reiterated:
o Service charge cannot
be added automatically or by default
o It cannot be collected
under any other name
o Payment must be voluntary and optional,
with clear consumer intimation
o No denial of entry or
service for refusal to pay
o Service charge must not
be added to the bill or subjected to GST
·
Violations found: Investigations based on National Consumer Helpline (NCH)
complaints revealed default levy of 10%
service charge, including by Café Blue Bottle, Patna and China Gate Restaurant Pvt. Ltd. (Bora Bora), Mumbai.
·
Enforcement actions:
o Café Blue Bottle, Patna: Refund to consumer, immediate
discontinuation of service charge, ₹30,000
penalty.
o China Gate (Bora Bora), Mumbai: Refund during hearing,
software modification to remove default charge, ₹50,000 penalty, and direction to
maintain an active grievance redressal email ID.
·
Ongoing monitoring: CCPA will continue strict enforcement
based on NCH complaints to protect
consumer rights and curb unfair trade practices.
The Central Consumer
Protection Authority (CCPA) has taken suo motu cognizance
against 27 restaurants located across the country for violation of consumer rights
and adoption of unfair trade practices under Section 2(47) of the Consumer Protection
Act, 2019, relating to the mandatory levy of service charge.
The action follows
the judgment of the Hon’ble High Court of Delhi dated 28 March 2025, which
upheld the Guidelines issued by CCPA on levy of service charge. The Court held
that mandatory collection of service charge by restaurants is contrary to law
and observed that all restaurant establishments are required to adhere to the CCPA
guidelines. The Court further affirmed that CCPA is fully empowered to enforce its
guidelines in accordance with law.
The Guidelines to Prevent Unfair
Trade Practices and Protection of Consumer Interest with Regard to Levy of Service
Charge in Hotels and Restaurants, issued by CCPA on 4 July 2022, stipulate that:
1.
No hotel or restaurant shall add service charge automatically
or by default in the food bill
2.
No service charge shall be collected by any other name
3.
Consumers shall not be forced to pay service charge
and must be clearly informed that it is voluntary and optional
4.
No restriction on entry or provision of services shall
be imposed based on refusal to pay service charge
5.
Service charge shall not be added to the bill and subjected
to GST
Investigations
revealed that several restaurants, including Café Blue Bottle, Patna, and China
Gate Restaurant Private Limited (Bora Bora), Mumbai, were automatically levying
a 10% service charge by default, in clear violation of the Consumer Protection
Act, 2019 and the CCPA Guidelines, which have now been upheld by the Hon’ble High
Court of Delhi.
The action was
initiated based on complaints received on the National Consumer Helpline (NCH),
supported by invoices clearly reflecting default addition of service charge. A detailed
investigation established that such practices amount to Unfair Trade Practice under
Section 2(47) of the Act.
In the case
of Café Blue Bottle, Patna, the CCPA directed
the restaurant to:
·
Refund the full amount of service charge to the consumer
·
Discontinue the practice of levying service charge with
immediate effect
·
Pay a penalty of ₹30,000
In the case of
China Gate Restaurant Private Limited
(Bora Bora), Mumbai, the restaurant refunded the service charge during the
hearing. The CCPA further directed the restaurant to:
·
Modify its software-generated billing system to remove
default addition of service charge or any similar charge
·
Pay a penalty of ₹50,000 for violation of consumer
rights and unfair trade practice
·
Ensure that its email ID available on public platforms
remains active and functional at all times for effective consumer grievance redressal,
as mandated under the Act
The Central Consumer
Protection Authority is closely monitoring complaints received on the National Consumer
Helpline regarding levy of service charge and will continue to take strict action
against non-compliant restaurants to safeguard consumer rights and prevent unfair
trade practices.