The material, found by The Daily Telegraph in bookstores in the Sydney suburbs of Lakemba and Auburn last year, was judged by federal authorities not to incite violence in the first known test of anti-terrorism laws.
Police Commissioner Ken Moroney said last night he felt uneasy about the continuing threat posed by such material remaining on the streets.
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But he said NSW Police would abide by the “qualified and considered legal opinion” offered by the Commonwealth Director of Public Prosecutions and Australian Federal Police.
The ruling comes despite British police establishing strong links between three of the suicide bombers involved in the July 7 London blasts and an Islamic bookstore in Leeds.
There have also been links in Australia between the suburbs where these books were on sale and alleged terrorist plots here.
One of the books, Defence of the Muslim Lands, carried an endorsement from Osama bin Laden on its back cover and promoted “wiring up one’s body” with explosives for “martyrdom or self-sacrifice operations”.
The Criminal West, written by Australian Muslim Omar Hassan, claimed to be called Australian was something to be ashamed of and Western culture is the culture of wolves, injustice and racism.
It also claims Australian police are rapists who bash young boys and spoke of a conspiracy involving politicians to turn young Muslims into drug addicts.
The Ideological Attack claims there was a barbaric onslaught against Muslims by Jews, Christians and atheists.
AFP spokeswoman Rebecca Goddard said the Commonwealth DPP found no offence had been committed under last year’s anti-terrorism Bill.
Ms Goddard also said the AFP judged the books are not in breach of either the Commonwealth Criminal Code or NSW Crimes Acts 1900.
The AFP analysed the material in context “relative to the time the books were written and the fact that some of the material could be described as descriptive, rather than inciting any type of violence”, she said.
“No action will be taken by the AFP against individuals who possess copies of the ‘books of hate’ or sell them,” she added yesterday.
A spokeswoman for Federal Attorney-General Phillip Ruddock said the minister was aware of the ruling.
She said the material was hardly “inclusive” but the minister accepted the judgment of the AFP.
The spokeswoman said the books did not meet the strict test of inciting violence – and offered this as proof that the laws were not a threat to freedom of speech.
“The test is, does it advocate the use of force or violence, and on this occasion the AFP and NSW Police with the DPP have deemed the material does not,” she said.
Other material analysed included the video Jihad or Terrorism by firebrand cleric Khalid Yasin.
Another item, an audio cassette called Da’Wah in The West, includes a speech by Ali al-Tamimi, who was sentenced to life in prison in the US last year for soliciting others to wage war.
NSW Jewish Board of Deputies chief Vic Alhadeff said: “While freedom of speech is one of the cornerstones of our society, so is the right to live in peace.”
The Islamic Bookstore at Lakemba, which sold Defence of the Muslim Lands, would not say whether it would sell the books again.