Home / News / Why should service charges be recovered from consumers as add'l levy, asks HC
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The Delhi High Court asked why restaurants should recover service charges from their customers as an “additional" and “separate levy". A high court bench headed by Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad said that the consumers perceive service charges as a government levy.

While hearing an appeal by Centre against a single judge's ruling that stayed its guidelines prohibiting hotels and restaurants from levying service charges, the high court said instead of recovering it as an additional charge or separate levy, the restaurants can increase their food prices to recover this charge.

The next hearing in the case is on August 18.

Appearing for a restaurant, a counsel said that the charge was not a government levy. The counsel said the service charge was for the benefit of the restaurant employees and it didn't mean “tips".

“You increase the salary. We will hear you," the court said, observing that the service charge was “very much connected with consumers".

The court said, “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."

Additional Solicitor General Chetan Sharma said it has given an impression that the service charge is a governmental levy or a governmental tax.

“The consumers face embarrassment when they don't pay or they are asked to pay. That is the reason hundreds of complaints were received," he said.

The court said, “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," the court said.

ASG Sharma further assailed the single judge order on the ground that it was passed in violation of principles of natural justice.

On July 20, a single judge bench had stayed the July 4 guidelines prohibiting hotels and restaurants from levying service charges automatically on food bills. The court said the service charge be displayed on the menu or other places.

(With agency inputs)

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