An Australian citizen has been stripped of his passport on the basis of secret ASIO evidence that allegedly shows he is a people smuggler.

The intelligence agency used national security legislation to successfully argue that the man's alleged activities were a threat to Australia's security.

Although the Department of Foreign Affairs and Trade (DFAT) would not comment on individual passport cancellations, lawyers were unable to recall another example of a suspected people smuggler's passport being cancelled on national security grounds.

After the Foreign Minister cancelled the man's passport at ASIO's request, the man, who cannot be named for legal reasons, appealed that decision in the Federal Administrative Appeals Tribunal.

An ASIO agent operating under the pseudonym "Alan Masling" said the man had been pleasant and cooperative in the three voluntary interviews he gave ASIO operatives.

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However, the man, referred to in court as MYVC, vehemently denied being a people smuggler, saying he was involved in legitimate business activities overseas.

Members of the tribunal saw evidence provided by ASIO in private, which they said left them in no doubt that MYVC, who lives in an unidentified foreign country, was a wealthy and experienced people smuggler.

Stephen Blanks, president of the NSW Council for Civil Liberties, told the ABC that the Government relied on a change to the law in 2010 which additionally defined security as protection from a serious threat to Australia's territorial or border integrity.

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"The extraordinary thing about it is it's not a case involving terrorism, it's a case involving people smuggling," Mr Blanks said.

"So when the Government says that these powers are needed to deal with the terrorist threat, that's actually quite misleading when they use them in relation to people smuggling cases.

"Certainly threats to border and territorial integrity were inserted into the definition of security in 2010, but it's not clear that people smuggling is within that definition or should be."

'Convenient way of dealing with it without doing the hard work'

Mr Blanks recently acted for Sayed Jaffarie, an Afghan-born Hazara who has also been accused of people smuggling.

Unlike MYVC, Mr Jaffarie is not an Australian citizen but his visa was cancelled on similar grounds.

As with MYVC's case, the evidence on which the decision was made was kept mostly secret, meaning it could not be challenged in court by the lawyers for either men.

"It's very disturbing that the evidence can't be tested in open court," Mr Blanks said.

"Accusing somebody of people smuggling is accusing them of a criminal offence.

"If they charge the person with a criminal offence they would have to produce evidence in open court and the accused would have his day in court to answer it.

"This way there is no idea of what the evidence is and the accused has no fair opportunity to answer the allegations.

"As far as I'm aware there has been no attempt to have this individual charged with any criminal offence or extradited back to Australia so that he can face criminal charges here.

"Certainly in the past when people have been accused of people smuggling activities and they are overseas, the Australian Government has taken steps to extradite them to Australia.

"Now it seems they've got a shortcut, convenient way of dealing with it without having to do the hard work."

The case of MYVC now moves to the Federal Court, where a directions hearing will take place later this month.

Immigration Minister Scott Morrison has defended the passport cancellation.

"We make no apologies for cancelling the passports of people who we suspect might be a national security threat or involved in that type of criminal behaviour," Mr Morrison said.

"This is something that is done and it's done for very good reason. The Australian Government, under this Government, has had remarkable success when it comes to smashing people smuggling all throughout the region and that has been a result of many initiatives."