Delhi High Court to hear case on levy of service charge by restaurants on August 31

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The Delhi High Court on August 18 agreed to list the case concerning the government's guidelines barring levy of service charge by restaurants on August 31. Earlier, the hearing was scheduled to be held in November.

A high court division bench was hearing an appeal filed by the Central Consumer Protection Authority (CCPA) challenging an interim order passed by a single-judge bench that stayed the guidelines concerning service charge.

The single-judge order had allowed restaurants to continue charging service charge on food bills albeit with a caveat that the restaurants would prominently mention the same for the benefit of the consumers.

CCPA had appealed before the division bench urging for the stay on its guidelines to be lifted. The Additional Solicitor General representing the government argued before the court that service charge is anti-consumer and is often painted as a government levy.

Restaurants should resort to increasing their prices to accommodate for service charge instead of charging consumers a separate charge which takes the colour a compulsory levy, the ASG argued.

The guidelines barring such a levy are a result of several complaints against service charge, the government counsel told the court.

The Federation of hotels and restaurants of India countered ASG's argument and said that increasing product prices would benefit other related and concerned parties and not the employees. A service charge is levied for the benefit of the employees and establishments pay Goods and Service Tax (GST) on the same, Senior Advocate Kapil Sibal said.

The wait staff pockets tips paid by customers whereas a service charge is distributed among the entire staff of restaurants including the kitchen and cleaning workforce, Sibal highlighted.

While the court observed that paying employees is a bounden duty and liability of an establishment owner, it questioned whether consumers could be burdened with the charge for the same.

However, the court granted time to the association to file its reply to CCPA's appeal against the stay order and has directed for the case hearing to be advanced from November to August 31 now. Meanwhile, restaurants remain free to levy a service charge in line with the conditions imposed by the single-judge.

The case will be heard in detail and on merit by the single-judge where the CCPA is free to press for the lifting of the stay, the court said today.