Mandatory Service Charge by Restaurant is Illegal: CCPA

In re FOO Ahmedabad Restaurant (Pebble Street Hospitality Pvt. Ltd.) (CCPA Delhi)

The Central Consumer Protection Authority (CCPA) took suo motu cognisance of a consumer grievance filed through the National Consumer Helpline regarding alleged overcharging by a restaurant. The complaint stated that a water bottle listed at ₹60 was billed at ₹180, along with an additional charge purportedly for pouring water, and a 10% service charge was levied despite applicable GST already being charged.

The CCPA noted that the issue indicated possible unfair trade practices affecting a wider class of consumers. A preliminary inquiry found prima facie evidence that the restaurant had levied service charges contrary to the CCPA’s 2022 guidelines, which prohibit mandatory service charges. It was also observed that the billing system was software-generated, suggesting systemic impact on multiple consumers.

The restaurant, in response, denied misrepresentation of the water bottle price and claimed that the menu displayed ₹180. It argued that the consumer had accepted the price at the time of ordering. It further relied on legal precedents to contend that pricing in restaurants includes service components and that charging above MRP does not violate law in such contexts. The restaurant maintained that service charges were disclosed in the menu, could be waived upon request, and were voluntarily paid in this instance. It also termed the complaint as an afterthought and offered a refund as a goodwill gesture.