NEW DELHI: Delhi high court on Tuesday questioned why restaurants should recover service charges from consumers as an “additional” and “separate levy” and agreed to examine an appeal filed by the Centre in this regard.
A bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad pointed out that the common man sees service charge as a government levy and restaurants can increase their food prices to absorb this charge instead of recovering it in the form of an additional charge over and above the total bill.
The court was hearing an appeal by the Centre against a single judge’s order staying its guidelines prohibiting eateries and hotels from levying service charge on food bills. It listed the matter for hearing on August 18.
During the hearing, the counsel representing one of the restaurant associations said that the service charge was not a government levy and it was for the benefit of the restaurant employees and can’t be seen as a substitute for a tip.
“You increase the salary. We will hear you,” the court said, also observing that the levy of service charge was “very much connected with consumers” and not just the employees of the restaurant.
“That (service charge as a government levy) 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 separately,” the court told the restaurant associations.
Additional Solicitor General Chetan Sharma stated that while the service charge is in the nature of a tip, the impression given to consumers is as if it is a governmental levy or a governmental tax.
Counsels appearing for restaurants said that the government does not prohibit service charges and when it is made clear by the restaurant that there would be a levy of service charge, it becomes a matter of contract.
However, the bench was not convinced. “Can they compel a person to pay any kind of service charge? You are the master of your price but you can’t then place an additional price that you pay an additional charge….A person who does not know the law or an illiterate person goes to a restaurant, you mean to say he is entering 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 the service charge,” it remarked.
