Barbeque Nation penalised for levying service charge

Tribune News Service

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Chandigarh, August 20

Asserting that the service charge charged by restaurants is totally illegal, the UT Consumer Disputes Redressal Forum has directed Barbeque Nation in Sector 26 to pay Rs 17,000 towards compensation and litigation costs.

The Barbeque Nation has also been directed to refund Rs193.6 paisa charged from the complainant as service charge; to pay Rs10,000 as compensation on account of deficiency in service and causing mental and physical harassment to the complainant; and to pay Rs7,000 as cost of litigation.

The complainan, Vikas Kuthiala, a resident of Sector 27, stated in his complaint that he along with his family members and a guest family, went to Barbeque Nation on May 2, 2014, for dinner. After they had finished their meal, he requested to provide him the bill, upon which he was shocked to find that the restaurant had charged an additional

amount of Rs193.60 paisa, towards service charges (being 4 per cent of the total billed amount of Rs 4,840).

The authorities told him that the amount had been charged as per the company’s policy.

Left with no other alternative but to pay, the complainant paid the bill.

Alleging unfair trade practices he moved the consumer forum.

What Barbeque Nation stated in reply

In its reply to the consumer forum, Barbeque Nation stated that VAT at the rate of 12.5 per cent is charged from all customers on the total bill amount (excluding liquor) plus the service tax is charged at the rate of 4.9449 per cent on the total bill amounting, including the service charge which is paid to the Chandigarh Administration by them and the said amount is not pocketed by them. It has been asserted that the complainant never objected to the service charge reflected in the bill and rather he paid the entire bill amount without any objection.

Reply of Chandigarh Administration

In its reply, the Chandigarh Administration stated that on October 31, 2014, all the hotel/restaurants in Chandigarh were instructed not to charge any service charges from its customers. However, on February 24, 2015, it was again clarified that the service charge was not a government levy but still it was collected by the restaurants ranging between 5 per cent and 10 per cent over and above the bill for food. Accordingly, all the restaurants/ eateries were directed to show cause as to why service charges levied and collected by them from the consumers over the bill for food be not

included in the gross turn over and taxed and penalised accordingly as per the provisions of Section 2of the Punjab Value Added Tax Act, 2005, as extended to and applicable to the UT, Chandigarh.

The forum ruled

“Even though the statute does not provide for levying of any service charges, the Barbeque Nation has taken the amount of Rs193.60 paisa as service charges from the complainant, which according to them is as per the policy of the company. “We do not find any merit in this contention as there is nothing on record, to substantiate this fact,” said the forum.

The forum stated that it is correct that a restaurateur provides many services, in addition to the supply of food. He provides furniture, furnishings, linen, crockery and cutlery. In order to compensate for these services, the government has authorised the restaurateur to charge the service tax at the rate of 4.94 per cent on 40 per cent of the bill amount and they are authorised to do so under Section 2C of the Service Tax (determination of value) Rules, 2006. “So, in our opinion, if the restaurant is charging any other illegal tax, amounts to unfair trade practice. The opposite parties have been fleecing customers by charging money at the rate of 4 per cent on the bill as service charges. By levying service charges, illegally, the restaurants are putting additional burden on the consumers, who already have to pay around 25 per cent taxes in the form of value added tax (VAT) at the rate of 12.5 per cent and service tax at the rate of 4.94 per cent. Pertinently, the Chandigarh Administration has recently declared service charges as illegal. Meaning thereby, the service charges cannot be levied on food served at the table. The Barbeque Nation have taken the stand of charging the service charges on the ground that the money charged was not pocketed by them and rather the same was paid to the Chandigarh Administration. However, they have 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,” said the forum.

Complainant had gone to dine with guests

The complainant, Vikas Kuthiala, a resident of Sector 27, stated in his complaint that he along with his family and guests, went to Barbeque Nation on May 2, 2014, for dinner. After they had finished their meal, he requested that he be provided the bill, upon which he was shocked to find that the restaurant had charged an additional amount of Rs 193.60 paisa, towards service charge (being 4 per cent of the total billed amount of Rs 4,840). The authorities told him that the amount had been charged as per the company’s policy.