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New Delhi, The Central Consumer Protection Authority (CCPA) has imposed a penalty of Rs 1 lakh on Shangri-La Eros New Delhi's restaurant 'Mister Chai' for forcibly levying a 10 per cent service charge on food bills.
In its order dated October 22, the regulator directed the restaurant to discontinue and refrain from levying or collecting any service charge automatically, by default or under any other name.
It also asked the restaurant to strictly comply with the guidelines, dated July 4, 2022, to prevent unfair trade practices and to protect consumer interest with regard to levy of service charge in hotels and restaurants.
"...the restaurant is directed to pay a penalty of Rs 1,00,000/- only," the CCPA said. The restaurant must submit a compliance report within 15 days of receiving the order.
Commenting on the order, Shangri-La Eros New Delhi spokesperson said it has reviewed its billing practices and confirms that, effective 1 October, 2026, service charges have been discontinued across all dining outlets and services at the hotel. Only applicable government-mandated taxes are reflected in guests' bills.
"We remain committed to transparent billing practices, ensuring our guests enjoy a seamless experience and the exceptional standards of hospitality for which Shangri-La is known," the spokesperson said in a statement.
The CCPA took cognisance of grievances dated May 30 and June 10, 2025, in which consumers alleged that a 10 per cent service charge was forcibly added to their bills at the outlet.
The authority noted that the Delhi High Court, in its March 28, 2025, judgement in 'National Restaurant Association of India & Ors vs Union of India & Anr', had held that all restaurants must adhere to the CCPA guidelines and that the authority was free to enforce them in accordance with law.
A preliminary inquiry found that the restaurant had levied the charge despite the court's ruling. Since the bills are software-generated, the CCPA said the practice may have affected a wider base of consumers, making it fit for class action under Section 10 of the Consumer Protection Act, 2019.
The investigation found that in Invoice No. M16727 dated May 30, 2025, a service charge of Rs 435 was levied on a subtotal of Rs 4,350, before CGST and SGST of Rs 430.65 each, taking the total to Rs 5,646.
In Invoice No. M17090 dated June 10, 2025, a charge of Rs 125 was added to a subtotal of Rs 1,250, followed by CGST and SGST of Rs 123.75 each, for a total of Rs 1,623.
The CCPA said consumers were thus made to pay tax on a non-statutory charge, inflating the amount payable without any recorded voluntary consent.
The restaurant contended that it was up to customers to request a waiver at the counter. The CCPA rejected this, saying the guidelines bar hotels and restaurants from adding service charge automatically or by default.
The argument that the customer "had enough time to deny payment", it said, itself confirmed that the billing system added the charge by default.
The authority also dismissed the restaurant's disclosure on the menu card, which described the charge as optional and waivable on request.
This created an "opt-out" mechanism rather than an "opt-in" one, it said, shifting the burden to consumers and exerting social pressure to pay.
Merely displaying such a charge on the menu or bill "does not cure the underlying compulsion", it added.
The restaurant's renaming of the levy later as "Charges for Voluntary Service Staff Contribution (optional)" was held to be legally untenable. Paragraph 7(ii) of the guidelines says service charge shall not be collected "by any other name", the CCPA noted.
Offering a refund after payment does not cure the violation either, since consent must be free, prior and informed at the time of billing, the authority said.
The CCPA held that the practice violated Sections 2(9), 2(28), 2(46) and 2(47) of the Consumer Protection Act, 2019, as an unfair contract and an unfair trade practice involving misleading representation. It said service charge or tip is a voluntary payment and cannot be compulsory.
The CCPA took note of the restaurant's refund of the disputed charge to the complainant. However, it pointed out that, by the restaurant's own submission, it stopped levying the charge only from October 1, 2026, after the CCPA took cognisance of the matter.
Despite the 2022 guidelines, the High Court's reaffirmation and the notice from the CCPA, the restaurant continued the levy for at least 15 months.
This "deliberate, continuous imposition" caused widespread prejudice to consumers as a class and attracted Section 21(7) of the Act, the authority said.
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