SARS has been ordered to reinstate a former employee dismissed over a R3.6 million VAT refund audit. The Labour Court found that while she failed to document some audit findings, her conduct did not amount to gross negligence
A South African Revenue Service (SARS) employee dismissed over a R3.6 million VAT refund audit has won her job back after the Labour Court found that her mistakes did not justify dismissal.
A key factor was evidence from SARS's own witness, who told arbitration proceedings that she still trusted the employee and that similar mistakes were often dealt with through warnings.
In a judgment delivered on August 11, 2026, Judge Makhura overturned a CCMA arbitration award that had upheld the dismissal of the employee, who had worked for the revenue service for more than 26 years without a disciplinary record.
Dispute over R3.6m VAT refund
The case involved a VAT refund claim submitted by the Muslim Judicial Council Land Trust (MJC) for April 2019.
A VAT auditor was assigned the case on December 24, 2019, and was required to investigate six identified risks.
SARS accused her of gross negligence for failing to follow audit procedures and properly record her findings. It alleged that this resulted in a financial loss of R3.6 million.
However, the court found that she had addressed the risks but failed to document her findings relating to three of them.
SARS witness supported employee
The SARS Audit Operations Manager testified that she still trusted the employee.
"SARS's main witness, who appears to have testified candidly, stated that she continued to trust the applicant, describing the misconduct as a once-off occurrence," the judge said.
"She also testified that, historically, employees who committed similar misconduct were ordinarily issued with warnings rather than dismissed."
Makhura said negligence could not be considered gross simply because an employer described it that way.
"First, negligence is not rendered gross or serious merely because an employer characterises it as such," Makhura said.
"Whether negligence rises to the level of gross negligence is an objective enquiry that must be determined with reference to the facts and evidence of the particular case. Its seriousness cannot be assumed; it must be established."
No financial loss suffered
The court also found that the R3.6 million refund was legitimate and lawfully due to MJC. The revenue service eventually paid the money on May 18, 2021.
"Accordingly, no financial loss was suffered by SARS as a consequence of the applicant's conduct," he said.
The court found her guilty of negligence, but ruled that dismissal was too harsh.
The court declared the dismissal substantively unfair and ordered SARS to reinstate the employee retrospectively, without loss of benefits.
SARS was also ordered to pay her backpay within 15 court days, while she received a written warning valid for five months.
"The applicant is ordered to report for duty within a reasonable time but not later than Monday, 17 August 2026 (unless she has a valid reason) in terms of her reinstated contract of employment."