Shangri-La Eros Hotel Fined ₹1 Lakh for Service Charge Violation

In a significant ruling, the Central Consumer Protection Authority (CCPA) has imposed a fine of ₹1 lakh on the Shangri-La Eros hotel in New Delhi for unlawfully adding a 10% service charge to food bills at its 'Mister Chai' restaurant. The CCPA's order, issued last week, mandates the restaurant to cease the automatic collection of this charge, which was levied without customer consent.

The controversy began when a consumer lodged a complaint regarding the automatic addition of the service charge, providing invoices as proof. The CCPA's investigation revealed that the hotel had been adding charges of ₹435 on a bill of ₹4,350 and ₹125 on a ₹1,250 subtotal, subsequently applying GST on these inflated totals. The hotel had informed the authority that it would stop this practice starting October 1, following its submission in late September.

Despite the hotel's assertion that the service charge was discretionary and that customers could opt out, the CCPA found this defense insufficient. The authority highlighted that the burden should not be placed on consumers to refuse a charge that was automatically included. This practice was deemed a violation of consumer rights and contrary to guidelines upheld by the Delhi High Court.

The implications of this ruling extend beyond the hotel itself, as it sets a precedent for consumer rights in the hospitality industry. The CCPA's decision underscores the importance of transparency in billing practices and reinforces consumer protection laws aimed at preventing unfair trade practices.

Looking ahead, the Shangri-La Eros hotel must comply with the CCPA's directive and ensure that all service charges are clearly communicated to customers. The authority's ruling may prompt other establishments to reassess their billing practices to avoid similar penalties in the future.