The Central Consumer Protection Authority (CCPA) has slapped a fine of Rs 50,000 on a company operating a popular Mumbai-based restaurant for automatically adding a service charge to customers' bills. The penalty was imposed on China Gate Restaurant Private Limited, which runs the Bora Bora restaurant in the city.
What Sparked the Consumer Complaint?
The action was initiated after a Mumbai resident filed a formal grievance with the authority in April. The complainant stated that he was charged a 10 per cent service charge, amounting to Rs 624, over and above the food order value and the applicable GST. He alleged that when he requested the restaurant to remove the charge, his request was refused, forcing him to pay the additional amount. Notably, the service charge was also levied on the GST amount, further inflating the bill.
CCPA's Investigation and Findings
Upon examining the bill, the CCPA found the consumer's complaint to be valid. The authority referenced a crucial March order from the Delhi High Court, which upheld the applicability of CCPA guidelines. These guidelines explicitly state that levying any mandatory service charge is contrary to law and against consumer interests.
In its order dated December 29, the CCPA noted that despite the Delhi High Court's validation of its rules, the restaurant continued to add the service charge by default. The authority also pointed out that the restaurant failed to appear for proceedings initially and did not provide the required information promptly.
Software System at the Heart of the Issue
The CCPA's investigation revealed a systemic issue. The restaurant was using a software-based billing system that automatically generated bills with the service charge included for all customers between March 28, 2025, and April 30, 2025. This practice implied that the restaurant's three outlets in Mumbai collected a substantial sum as a mandatory service charge from countless patrons during this period.
Although the restaurant later submitted that it had discontinued the levy with immediate effect, the evidence from the billing software proved the widespread nature of the practice.
The Final Order and Directives
The CCPA has directed the restaurant to take immediate steps to modify its software-generated billing system. The key mandate is to remove the default addition of a service charge or any other similarly labelled mandatory fee. The Rs 50,000 penalty serves as a strong warning to the hospitality industry at large against imposing such charges without the explicit and voluntary consent of the customer.
This case reinforces the legal position that service charge is entirely optional, and a customer has the right to refuse to pay it. Consumers are not obligated to pay any fee that is automatically added to their bill under the guise of a service charge.
