Rs 1L penalty on Shangri-La for service charge

NEW DELHI: Central Consumer Protection Authority (CCPA) has imposed a penalty of Rs 1 lakh on Delhi's Shangri-La Eros hotel for illegally levying a 10% service charge on food bills at its "Mister Chai" restaurant.

It has also directed the restaurant to "discontinue and refrain from collecting any charge automatically or by default or under any other name".The order, passed last week, noted that the hotel had submitted to the authority in late September that it was discontinuing the practice from Oct 1.The order, passed by CCPA chief commissioner Nidhi Khare and commissioner Anupam Mishra, detailed how the restaurant had automatically added service charge to bills - Rs 435 on a subtotal of Rs 4,350 and Rs 125 on a subtotal of Rs 1,250 - and subsequently levied GST on the inflated amounts.

A consumer had complained that a 10% service charge was forcibly levied on food bills and submitted invoices as evidence.Following the complaint, CCPA issued a notice to the hotel. In its response, the hotel argued that service charge was discretionary and that the option to request a waiver was explicitly mentioned on every page of the menu. It denied forcing customers to pay the charge, claiming that the complainant had not raised any objection before or after paying the bills.

The hotel had termed it as "Charges for Voluntary Service Staff Contribution (optional)".Rejecting the hotel's defence, CCPA said placing the "onus on consumers to opt out of an automatically levied service charge contradicts" its guidelines, which have been upheld by the Delhi High Court."The restaurant's defence that the customer 'had enough time to deny payment' itself confirms that their billing software/POS system automatically includes the 10% service charge, thereby impacting a wider class of consumers as envisaged under Section 10 of Consumer Protection Act," the authority said.

It held that the practice amounted to an unfair trade practice. In its response dated Sept 22, the hotel had informed CCPA that the service charge had been refunded to the complainant and that it was in the process of stopping automatic inclusion of the charge in bills from this month.