The Central Consumer Protection Authority (CCPA) has levied a fine of ₹50,000 on the popular tea cafe chain Chaayos. The penalty was imposed for the automatic addition of service charges to customer bills via its billing software, a practice deemed non-voluntary by the CCPA. Chief Commissioner Nidhi Khare, along with Commissioner Anupam Mishra, presided over the decision, determining that any charge added by default cannot be considered a voluntary customer payment.
The ruling was issued on July 14 in a suo motu case following a grievance lodged by a consumer, Shashank Sood, with the National Consumer Helpline on March 30, 2025. Sood reported being charged a ‘service tax’ at a Chaayos location, in addition to the standard Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST). His bill included a service charge of ₹15.33 on a total amount of ₹438, culminating in a final payment of ₹476. Sood alleged that the outlet insisted the charge was mandatory per company management policy and not refundable.
This grievance arose shortly after the Delhi High Court’s decision on March 28, 2025, which reinforced the CCPA’s 2022 guidelines prohibiting mandatory service charges by restaurants. The High Court clarified that while customers may choose to tip, such charges cannot be pre-included in the bill.
Chaayos, operated by Sunshine Teahouse Private Limited, defended its practice by stating that the service charge was voluntary and that customers were informed of their option to have it removed or refunded, as indicated by signage at the point of sale. The company also claimed that Sood did not request a refund and noted that a service charge had been waived for an order he placed on March 27, 2025.
However, the CCPA found no satisfactory explanation from Chaayos regarding why an ‘Optional Service Charge’ was automatically added to bills, directly contravening explicit guidelines. An investigation by the Director General found that Chaayos continued to impose these charges even after the Delhi High Court’s ruling and failed to address Sood’s complaint despite being contacted by the National Consumer Helpline.
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The CCPA dismissed Chaayos’ argument that the service charge was voluntary, pointing out that the charge’s inclusion stemmed from a pre-set command in the billing software. The authority identified a ‘clear pattern of deliberate non-compliance’ with both CCPA guidelines and judicial directives, constituting an unfair trade practice as per Section 2(47) of the Consumer Protection Act, 2019, and misleading advertising.
Chaayos has since informed the CCPA that it ceased the practice of adding service charges across all outlets from May 1, 2025, and has provided invoices confirming the removal of such charges. The CCPA has ordered Chaayos to refund the service charge paid by Sood, eliminate the default charge from its billing software, and pay the imposed penalty of ₹50,000. A compliance report is required within 15 days of receiving the order.
Advocate Nikhil Mandhotra represented Chaayos in this matter.
