CCPA Orders ₹1 Lakh Penalty Against Shangri-La Eros for Default Service Charge Billing at Mister Chai Outlet
1. Background and Consumer Grievances
The Central Consumer Protection Authority (CCPA), in its order dated 22 October 2026, took up the matter concerning Shangri-La Eros New Delhi following consumer grievances dated 30 May 2025 and 10 June 2025. The complaints arose from visits to the hotel's "Mister Chai" outlet, where consumers alleged that a 10% service charge was being automatically imposed on their food bills without their free and explicit consent.
The grievances were accompanied by invoice copies that became central to the proceedings. Invoice No. M16727 dated 30 May 2025 showed a service charge of ₹435 levied at 10% on a food subtotal of ₹4,350, with CGST of ₹430.65 and SGST of ₹430.65 subsequently applied, bringing the total bill to ₹5,646. Invoice No. M17090 reflected a service charge of ₹125 on a subtotal of ₹1,250, with CGST of ₹123.75 and SGST of ₹123.75, yielding a final total of ₹1,623. A critical point noted during investigation was that GST was computed on the enhanced amount inclusive of the service charge — meaning consumers were effectively being made to pay tax on a non-statutory charge.
2. Legal Framework Governing the Dispute
(i) Consumer Protection Act, 2019 — Relevant Provisions
Before examining the conduct of the restaurant, it is useful to set out the statutory provisions that CCPA applied in this matter.
Section 2(9) of the Consumer Protection Act, 2019 defines consumer rights and includes, under sub-clauses (ii) and (v):
"the right to be informed about the quality, quantity, potency, purity, standard and price of goods, products or services, as the case may be, so as to protect the consumer against unfair trade practices"
and the right to seek redressal against unfair trade practices or restrictive trade practices or unscrupulous exploitation of consumers.
Section 2(28) addresses misleading advertisements and representations. CCPA's reasoning under this provision was that when a restaurant displays menu prices, those prices already carry an inherent service component. The subsequent addition of a separate charge creates an implied representation that the restaurant had concealed the true cost of the meal, which constitutes a misleading representation falling within Section 2(28)(i) and Section 2(28)(iii).
Section 2(46) defines an unfair contract as:
"a contract between a manufacturer or trader or service provider on one hand, and a consumer on the other, having such terms which cause significant change in the rights of such consumer, and imposing on the consumer any unreasonable charge, obligation or condition which puts such consumer to disadvantage"
Section 2(47) defines unfair trade practice to include deceptive or unethical methods used to promote the sale, use, or supply of goods or provision of services. Section 2(46)(vi) was read alongside Section 2(47) in CCPA's findings on unfair trade practice.
Section 10 of the Consumer Protection Act, 2019 empowers CCPA to act where a practice affects consumers as a class. Since the billing was software-generated and applied uniformly, CCPA treated the matter as capable of impacting a wide consumer base, making it suitable for class action under this provision.
Section 18(2) and Section 19 confer on CCPA the authority to conduct preliminary inquiries. Section 20 and Section 21 empower it to issue directions and impose penalties. The maximum penalty for a first contravention may extend to ten lakh rupees and for every subsequent contravention may extend to fifty lakh rupees. Section 21(7) prescribes the factors relevant to determining penalty quantum, namely the population and area impacted, the frequency and duration of the offence, the vulnerability of the class likely to be affected, and the gross revenue derived from the practice.
(ii) CCPA Guidelines on Service Charge, 2022
CCPA had earlier issued the Guidelines to Prevent Unfair Trade Practices and Protection of Consumer Interest with Regard to Levy of Service Charge in Hotels and Restaurants on 4 July 2022. The portions most directly relevant to this case read:
"3. Service charge is being levied in addition to the total price of the food items mentioned in the menu and applicable taxes, often in the guise of some other fee or charge.
It may be mentioned that a component of service is inherent in price of food and beverages offered by the restaurant or hotel. Pricing of the product thus covers both the goods and services component. There is no restriction on hotels or restaurants to set the prices at which they want to offer food or beverages to consumers. Thus, placing an order involves consent to pay the prices of food items displayed in the menu along with applicable taxes. Charging anything other than the said amount would amount to unfair trade practice under the Act.
Therefore, to prevent unfair trade practices and protect consumer interest with regard to levying of service charge, the CCPA issues the following guidelines —
(i) No hotel or restaurant shall add service charge automatically or by default in the bill.
(ii) Service charge shall not be collected from consumers by any other name.
(iii) No hotel or restaurant shall force a consumer to pay service charge and shall clearly inform the consumer that service charge is voluntary, optional and at consumer's discretion.
(iv) No restriction on entry or provision of services based on collection of service charge shall be imposed on consumers.
(v) Service charge shall not be collected by adding it along with the food bill and levying GST on the total amount."