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Hyderabad Restaurant Fined Over Service Tax
Hyderabad Restaurant Ordered to Compensate Customer Over Service Tax
Introduction
A restaurant in Hyderabad’s upscale Jubilee Hills area has been ordered by the court to pay Rs 4,000 in compensation to a customer for wrongly charging a service tax. The incident occurred when Harish Kumar Goud, a real estate businessman, dined at Chiguru Restaurant on Road No. 36 in October 2023. Goud noticed a service tax of Rs 247 on his bill and, after his request for a refund was denied, he took legal action.
The Dispute Over Service Tax
Harish Kumar Goud, during his meal with clients at Chiguru Restaurant, received a bill totaling Rs 3,116. Upon reviewing the bill, he spotted a charge listed as “Service Tax Optional (ST OPT 10%)” amounting to Rs 247.90. Immediately, Goud called the waiter and questioned the legality of this charge, citing that service tax was not legally enforceable.
Despite Goud’s insistence, the restaurant refused to refund the amount, claiming that the charge was standard practice. Frustrated by their refusal, Goud sent a legal notice to the restaurant, challenging the imposition of the service tax.
Legal Action and the Court’s Decision
After receiving the legal notice, the restaurant returned the amount of Rs 247 to Goud. However, when Goud inquired if the restaurant would discontinue the practice of charging service tax, the management informed him that they would continue to do so. Feeling humiliated and insulted, especially in front of his clients, Goud returned the refunded amount and decided to escalate the matter by seeking further compensation.
Goud approached the consumer court, demanding a compensation of Rs 1,00,000 for the mental agony and embarrassment caused by the restaurant’s illegal practice of levying service tax. He also requested the immediate removal of the service tax from the restaurant’s billing system.
In its final ruling, the consumer court directed Chiguru Restaurant to refund the Rs 247 charged as service tax to Goud, with an additional 9% interest per annum from the date of the incident (October 28, 2023). Moreover, the court ordered the restaurant to pay Rs 3,000 as compensation for the mental anguish caused and Rs 1,000 for other legal costs incurred during the case.
Significance of the Ruling
This ruling serves as an important reminder for businesses, especially those in the hospitality sector, that improper or illegal billing practices can lead to legal repercussions. Charging service tax, particularly after the implementation of the Goods and Services Tax (GST), is illegal unless the service provider is specifically authorized by the law. This is the key reason why the customer, Harish Kumar Goud, objected to the charge.
The court’s decision not only validated Goud’s concerns but also set a precedent for other consumers facing similar situations. It is essential for customers to be aware of their rights, especially when it comes to extra charges such as service tax or service charges that are labeled as optional.
Mental Agony and Compensation
The court acknowledged the mental distress and embarrassment faced by Goud due to the restaurant’s illegal billing practices. Being a businessman dining with clients, Goud felt humiliated when the restaurant insisted on charging the service tax despite his objections. His legal action was not just about the money but also about standing up against unethical practices in a professional setting.
As a result, the court awarded Rs 3,000 as compensation for the mental agony endured by Goud. This compensation, combined with the refund and interest on the disputed service tax amount, sends a strong message to businesses about maintaining transparent and legal billing practices.
Conclusion
This case highlights the importance of adhering to legal guidelines in billing customers. The Jubilee Hills restaurant, Chiguru, learned a costly lesson about the improper application of service tax. With the court ordering a refund, interest, and compensation, it is clear that businesses must ensure their billing practices comply with legal standards. For customers like Harish Kumar Goud, this victory is a reminder that consumers have rights, and standing up for them can lead to positive outcomes.
Disclaimer:
The information provided in this article is based on reports available at the time of writing. The content is intended for informational purposes only and should not be considered legal advice. Any changes in legal proceedings or updates may not be reflected immediately.
