CCPA Imposes ₹1 Lakh Penalty on Shangri-La Eros for Levying Service Charge [Read Order]

New Delhi: The Central Consumer Protection Authority (CCPA) has imposed a penalty of ₹1,00,000 on Shangri-La Eros, New Delhi, for automatically levying a 10% service charge on bills at its restaurant “Mister Chai”, holding that the practice violates the Consumer Protection Act, 2019 and the CCPA’s Service Charge Guidelines of 2022. The order was passed by a Bench of Chief Commissioner Ms. Nidhi Khare and Commissioner Mr. Anupam Mishra on 22 October 2026.

The CCPA took cognizance of two consumer grievances dated 30.05.2025 and 10.06.2025, in which it was alleged that a 10% service charge was forcibly levied on food bills at Mister Chai. The consumers produced two invoices: one with a subtotal of ₹4,350, on which a service charge of ₹435 was added before GST, taking the total to ₹5,646, and another with a subtotal of ₹1,250, on which a service charge of ₹125 was added, taking the total to ₹1,623.

A preliminary inquiry under Sections 18(2) and 19 of the Act prima facie found that the service charge was being levied despite the Delhi High Court’s judgment of 28 March 2025 in National Restaurant Association of India & Ors. v. Union of India & Anr., which upheld the 2022 Guidelines. As the bill was software-generated, the CCPA noted that the practice could affect a wider class of consumers, making it fit for class action under Section 10. A notice was issued on 28 July 2025, and a detailed investigation by the Director General (Investigation) followed.

In its reply, the restaurant contended that the service charge was discretionary and voluntary, as every page of the menu stated that it could be waived on request. It argued that the complainant never asked for a waiver or refund, that the percentage was in line with industry standards, and that it was willing to refund ₹560. The CCPA, however, observed that placing the onus on consumers to ask for a waiver contradicts the Guidelines, which bar any hotel or restaurant from adding service charge automatically or by default.

The DG (Investigation), in a report dated 5 June 2026, found that the automatic inclusion of the charge amounted to an unfair contract term and an unfair trade practice, as it created an impression of compulsion and made consumers pay GST on a non-statutory charge. It also found that a refund after payment does not cure the violation, since consent must be free, prior and informed at the time of billing.

At the hearing on 24 August 2026, the restaurant relied on Paragraph 174 of the High Court’s judgment, which suggested that the charge could be renamed. It said its invoices now described the charge as “Voluntary Service Staff Contribution (Optional)”. It also said that staff verbally sought the customer’s consent before billing. On 22 September 2026, it informed the CCPA that the amount had been refunded to the complainant, that it operates three restaurants under Shangri-La Eros (Tamra, Shang Palace and Sorrento Grappa, besides Mister Chai), and that the charge would stop completely from 1 October 2026.

The CCPA rejected the contentions. It held that when a restaurant displays menu prices, a component of service is already inherent in them, and placing an order amounts to consent only to the displayed price plus applicable taxes. A mandatory service charge added later, it said, conveys that the true price was concealed, contravening Section 2(28) of the Act.

On the renaming, the CCPA held that it was legally untenable under Paragraph 7(ii) of the Guidelines, which prohibits collection of service charge “by any other name”. It found that the change only showed that the charge remained embedded in the billing software by default. Describing the “can be waived off” disclosure as a coercive mechanism, the Authority held that mere display of the charge on the menu card or bill does not cure the compulsion. It concluded that the “opt-out” rather than “opt-in” mechanism “fundamentally vitiates consumers’ free consent”.

The CCPA noted the refund but observed that the restaurant stopped the levy only from 1 October 2026, after the CCPA had taken cognizance. Despite the 2022 Guidelines, their judicial affirmation in March 2025 and the CCPA’s notice, it persisted for at least fifteen months, causing widespread prejudice to consumers as a class and attracting Section 21(7) of the Act.

The Authority held the restaurant in violation of consumer rights under Section 2(9)(ii) and (v), misleading advertisement under Section 2(28)(i) and (iii), unfair trade practice under Section 2(47) read with Section 2(46)(vi), and the 2022 Guidelines. 

It directed the restaurant to discontinue levying any service charge automatically, by default or under any other name, to pay a penalty of ₹1,00,000, and to file a compliance report within 15 days of receipt of the order.

Appearances: For Shangri-La Eros: Ms. Vidhi Goel, Advocate.

Case Title: In the matter of Shangri-La Eros regarding alleged levying of service charge, violation of Consumer Rights and Unfair Trade Practices, Case No. CCPA-2/74/2025-CCPA

[Read Order]