Customers perceive service charge as govt levy: Delhi HC

New Delhi: The common man perceives service charge levied by a restaurant as a government levy, the Delhi high court observed on Tuesday while suggesting that eateries increase the price of the food in the menu, instead of taking service charge “separately”.

The remarks were made by the court while hearing a plea by Central Consumer Protection Authority (CCPA) against the single judge’s order of July 20 which allowed restaurants across the country to levy service charge, over and above the food bill. “That is what a common man perceives. Increase your food price, no problem, because you are entitled to fix a rate for your food but don’t levy it (service charge) separately…,” a bench of chief justice Satish Chandra Sharma and justice Subramonium Prasad said, although it did not pass any directions at this stage and posted the matter for Thursday. The court also sought to know from the lawyers of the National Restaurant Association of India ( NRAI) and Federation of Hotel and Restaurant Associations of India, whether they can claim a right to levy service charge.“What is your right to claim service charge? Can you compel a person to pay a service charge?” the bench asked the counsels for one of the associations.

Responding to this query, the counsel for NRAI submitted that service charge is a matter of “contract” as it is made very clear on the menu card and displayed in restaurants that there will be a levy of service charge.

To this, chief justice Sharma asked, “…a person who does not know law or an illiterate person goes to a restaurant; you mean to say he will enter into a contract? A person who does not understand law goes for a cup of tea, so he is entering into a contract and he has to pay service charge?”

The counsel clarified that service charge is not connected to the consumers but to the employees. However, the court did not seem convinced with this argument and said that service charge is “very much connected” to the consumers as it is being recovered from them.

On a submission of the counsel that service charge is an element which goes to those employees “who are back of the house” and is not a substitute for tips, the court remarked, “You increase the salary. We will hear you. Be ready,” said the court. CCPA had appealed against the single judge’s order contending that consumers should not be forced to pay the service charge.

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