A religious group found to have illegally cleared and developed a rural block north-west of Sydney has been stripped of its charity status following an investigation by the national charities regulator.

Mustapha Kara-Ali is the imam of Diwan Al Dawla, an Islamic-influenced guild which runs a religious retreat on a property by the river at Colo.

For months he and Diaa Kara-Ali have been the subject of a legal battle with the Hawkesbury City Council over the cleared land and related contempt of court charges.

Dr Kara-Ali claimed his group was exempt from Australian law because it was a basic religious charity.

The Australian Charities and Not-for-profits Commission (ACNC) did not support that claim and today announced it had revoked Diwan Al Dawla's charity status after an investigation.

ACNC commissioner Gary Johns said charity stratus revocation was the most serious action the national regulator could take.

"No charity is above the law," Dr Johns said.

"By revoking Diwan Al Dawla's charity registration, the organisation is no longer able to access Commonwealth charity tax concessions."

Dr Kara-Ali said the ACNC did not have a reason to revoke his group's charity status.

"They've said our purpose is to be an illegal organisation, which is horrendous," he said.

"We don't have a purpose to be an illegal [organisation], we have a religious purpose.

"The fact I've personally committed an apparently illegal act [shouldn't affect the guild].

"… This is religious vilification … we are being targeted and we believe it's because of our religion and our race."

Mustapha and Diaa Kara-Ali fronted the Supreme Court earlier this month. ( ABC News )

In September, a court heard the two men detained a process server who was delivering court documents.

Frank Hoare claimed he was approached at the property, called "an infidel", and ordered off the "sacred land".

The Kara-Alis told Mr Hoare to take the documents with him but then padlocked a front gate before he had time to leave, court documents revealed.

Mr Hoare sat in his car as the papers were thrown in the front seat.

Dr Mustapha Kara-Ali has previously told the ABC he would not take part in the court process, citing "religious persecution".

A lawyer for the pair was last week scolded by a Sydney judge who warned their "time had absolutely run out" after they were ordered to remediate the cleared land.

The work included planting 5,000 saplings and monthly weed spraying.