Service charge by eateries illegal in Chandigarh: Consumer forum
Even as ambiguity on validity of service charge prevails in the city, Chandigarh district consumer disputes redressal forum once again reiterated that “there is no statutory law under which service charges are levied”; thus forcing customers to pay it amounted to “unfair trade practice”.chandigarh Updated: Aug 20, 2015 14:13 IST
Even as ambiguity on validity of service charge prevails in the city, Chandigarh district consumer disputes redressal forum once again reiterated that “there is no statutory law under which service charges are levied”; thus forcing customers to pay it amounted to “unfair trade practice”.
Pulling up the Sector 26-based restaurant run by Barbeque Nation Hospitality Limited for “resorting to unfair trade practice in collecting the excess amount and had failed to return the same, which resulted in mental agony and harassment”, the consumer forum directed it to pay Rs 10,000 as compensation to Sector 27-resident Vikas Kuthiala.
Even the UT administration, which was impleaded as a party in the case, failed to clarify the validity of service charge. It simply placed on fact the letter issued by it in February 2015, stating that “service charge is not a government levy but still it is collected by the restaurants”.
The administration submitted that eateries were directed to pay tax on service charge levied and collected by them from customers.
Clearing the air, the consumer forum in its detailed order said: “The Chandigarh administration has recently declared service charge illegal, superseded by another letter in February, meaning thereby the service charge cannot be levied on food served at the table.”
Dismissing the argument of the restaurant that they are paying tax on service charge to the UT, the consumer forum held, “The restaurant has miserably failed to place on record any cogent, convincing and reliable evidence to show the same. Hence, the excuse taken by them does not hold any water.” Directing Barbeque Nation to refund Rs 194 charged as service charge on Kuthiala’s food bill on May 2, 2014, along with payment of Rs 7,000 as cost of litigation, the consumer forum held: “The restaurant has not placed on record any statute, instructions or guidelines that entitles it to levy the service charge to the extent it charged from the complainant… It is correct that the restaurant provides many services, in addition to supply of food; so in order to compensate for these services, the government has authorised the restaurateur to charge the service tax at 4.94% on 40% of the bill amount.”
Finding the restaurant guilty of fleecing the customers by charging money at 4% on the bill as service charges, the forum said: “In our opinion, if the restaurants are charging any other illegal tax, it amounts to unfair trade practice.”