Authority says charges generated automatically through billing software cannot be treated as voluntary payments; directs Chaayos to refund the amount collected from the complainant and remove the feature
The Central Consumer Protection Authority (CCPA) has imposed a penalty of Rs 50,000 on tea café chain Chaayos for automatically adding a service charge to customers’ bills through its billing software. The consumer watchdog held that a charge inserted by default cannot be considered a voluntary payment, even if customers are later given the option to have it removed.
The order, issued on 14 July by Chief Commissioner Nidhi Khare and Commissioner Anupam Mishra, said that a service charge generated automatically by billing software originates from a preset system command rather than a customer’s choice. Therefore, such a charge cannot be presumed to have been paid voluntarily.
The proceedings stemmed from the CCPA taking suo motu cognisance of a complaint filed with the National Consumer Helpline by customer Shashank Sood on 30 March 2025.
According to the complaint, a Chaayos outlet levied a separate “service tax” in addition to the applicable Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST). The bill included a service charge of Rs 15.33 on an order worth Rs 438, taking the total amount payable to Rs 476. Sood alleged that the outlet declined to remove or refund the charge, stating that it had been mandated by the company’s management.
The Authority noted that the complaint was lodged shortly after the Delhi High Court’s judgment on 28 March 2025, which upheld the CCPA’s 2022 guidelines prohibiting restaurants from imposing service charges by default. The court had ruled that while customers may voluntarily leave a tip, restaurants cannot add a service charge automatically to the bill.
Chaayos, operated by Sunshine Teahouse Private Limited, argued that the service charge was optional. The company told the Authority that notices displayed across its outlets informed customers that the charge could be removed or refunded on request. It also denied that Sood had sought a refund and said it had waived the service charge on an earlier order placed by him on 27 March 2025.
However, the CCPA observed that the company failed to explain why an “Optional Service Charge” continued to be added automatically despite the guidelines expressly prohibiting such a practice.
The Director General (Investigation) concluded that Chaayos continued to apply the service charge by default even after the Delhi High Court’s ruling. The investigation also found that the company did not resolve the consumer’s grievance despite receiving communications from the National Consumer Helpline.
Rejecting Chaayos’ argument that the charge was voluntary, the Authority said the addition originated from instructions embedded in the billing software. It further observed that the company had shown a clear pattern of non-compliance with both the CCPA guidelines and the Delhi High Court judgment.
The CCPA held that the practice violated consumer rights under Section 2(9) of the Consumer Protection Act, 2019, constituted an unfair trade practice under Section 2(47), and also breached provisions relating to misleading advertisements.
During the proceedings, Chaayos informed the Authority that it had discontinued service charges across all its outlets and ordering channels from 1 May 2025. The company submitted invoices to demonstrate that the practice had been withdrawn.
The Authority directed Chaayos to refund the service charge collected from Sood, remove the default service charge feature from its billing software, pay a penalty of Rs 50,000, and submit a compliance report within 15 days of receiving the order.
