The Delhi High Court has taken strong note of restaurants mandatorily levying service charges, asking why customers should pay over and above the already inflated Maximum Retail Price (MRP). A bench of Chief Justice DK Upadhyaya and Justice Tushar Rao Gedela noted that ambience and hospitality should logically form part of the MRP, questioning the separate levy.
A single judge in March had already ruled that restaurants cannot impose service charges in a “camouflaged and coercive” manner, terming it an unfair trade practice. Despite this, many restaurants continued to levy such charges, prompting the appeal.
Ambience Already Included in MRP, Says Court
During the hearing, the bench cited the example of a water bottle priced at ₹20 but sold for ₹100 in restaurants. “If you are already quoting ₹100, does that not cover the ambience and service you claim? Then what exactly is the additional service charge for?” the court asked the counsel representing the National Restaurant Association of India (NRAI) and Federation of Hotels and Restaurant Associations of India (FHRAI).
The judges stressed that ambience, music, and hospitality cannot be separately charged when consumers are already paying an inflated MRP.
Centre Calls Service Charge a Burden
The counsel for the central government defended the March ruling, describing service charges as a “double whammy” for consumers, who also end up paying GST on top. The bench, however, remarked that the government must strengthen its legal metrology department to enforce compliance more effectively.
Restaurant Associations Defend Practice
The restaurant associations argued that service charges reflect the hospitality and experience offered to customers, claiming that menus are only “an invitation to offer” and that diners have a choice whether or not to accept them. However, the bench remained unconvinced, pointing out that most customers face compulsion once seated and billed.
What’s Next?
The court has scheduled the next hearing for September 22, indicating it aims to settle the issue conclusively. Until then, the debate over whether service charges are justified — or an unfair consumer burden — continues to stir public interest.
