The Central Consumer Protection Authority (CCPA) has imposed a penalty of Rs 50,000 on tea café chain Chaayos for automatically adding service charges to customers’ bills through its software-generated billing system. The Authority has held that a service charge added by default through billing software cannot be considered a voluntary payment by a customer.
As per media reports, the order has been passed on July 14 in a suo motu case initiated after customer Shashank Sood registered a grievance with the National Consumer Helpline on March 30, 2025. Sood had alleged that a Chaayos outlet separately charged him a service charge in addition to Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST). According to the complaint, the outlet refused to refund the amount, stating that it was mandated by the company and was non-refundable.
The CCPA has noted that the complaint was lodged shortly after the Delhi High Court’s March 28, 2025 judgment upholding the Authority’s 2022 guidelines on service charges. The High Court has ruled that restaurants cannot compulsorily collect service charges and that customers may voluntarily pay a tip, but such an amount cannot be added by default to a bill.
Chaayos, operated by Sunshine Teahouse Private Limited, has informed the CCPA that its service charge was voluntary and that customers were notified through signage at points of sale that they could request its removal or refund. The company has also denied that the complainant sought a refund and has stated that the service charge had been waived on an earlier order placed by him on March 27, 2025.
However, the CCPA has found that the company failed to explain why an “Optional Service Charge” continued to be automatically added to bills despite the guidelines prohibiting such a practice. The Director General (Investigation) has also found that the charge continued to be added by default after the Delhi High Court’s ruling and that the company failed to resolve the consumer grievance despite communications from the National Consumer Helpline.
The Authority has rejected Chaayos’ contention that the charge was voluntary, observing that it originated from a command embedded in the billing software. It has further found a pattern of non-compliance with the CCPA guidelines and the Delhi High Court’s judgment, holding that the practice violated consumer rights under the Consumer Protection Act, 2019, amounted to an unfair trade practice, and also violated provisions relating to misleading advertisements.
Chaayos has informed the Authority that it discontinued service charges across all outlets and ordering channels from May 1, 2025, and has submitted invoices showing that the charge is no longer being levied.
The CCPA has directed Chaayos to refund the service charge paid by the complainant, remove the default service charge from its billing software, pay a penalty of Rs 50,000, and submit a compliance report within 15 days of receiving the order. Chaayos has been represented by advocate Nikhil Mandhotra.
