The Victorian Civil and Administrative Tribunal ruled on Friday that Catch the Fire Ministries office holders Danny Nalliah and Daniel Scot breached the Religious and Racial Tolerance Act in a 2002 seminar by, among other things, calling Muslims liars and demons. 

The action against Catch the Fire was brought by the Islamic Council of Victoria and the decision was welcomed as setting the limits for religious debate in Australia.

Penalties, which could include orders for an apology or financial compensation, will be decided early next year.

The tribunal noted that in the seminar Scot claimed Muslims had a plan to overrun Western democracies by violence and terror and turn Australia into an Islamic nation.

Islamic Council president Yasir Suliman said it was a landmark ruling.

"We also had the support of the Catholic Church, the interfaith community and the Uniting Church and the Jewish community", Suliman told Australia's AAP news agency.

"It was very important that we all stood together against vilification and understand that vilification is a tool used by extremists, and we must always condemn extremism and vilification."