A Sinn Fein member stopped in a car with an armour-penetrating rocket claims the device was being moved for safe destruction, the High Court heard today.
Jason Ceulemans was one of three men detained after police recovered the projectile containing 200g of semtex in Londonderry.
The 40-year-old butcher, of Lecky Road in the city, faces charges of possessing explosives, conspiracy to murder and having a walkie-talkie radio for terrorist purposes.
The device was inside a hold-all found in a Renault Megane being driven by Ceulemans when it was stopped on the Creggan area on December 6 last year.
A judge was told it was copper-tipped and able to be either thrown or deployed from a stationary position.
Connecting wires was all that was required for it to be in a state of readiness, the court heard.
Opposing Ceulemans' application for bail, a prosecution barrister said the seizure was linked to dissident republicans.
He told the court two separate factions operating in Derry - Republican Action Against Drugs and the Real IRA - have now merged into a grouping calling itself The New IRA.
"It's believed that it's connected with that organisation," he said.
Although Ceulemans has a completely clear record, the lawyer claimed there was a risk of re-offending.
Defence counsel Andrew Moriarty argued that white spirits found in the Megane backed his client's alleged reasons for moving the car and its contents to a remote location.
"It was not for the purpose of any form of deployment or any form of activity, it was for the purpose of destruction," he said.
Mr Moriarty told the court Ceulemans has been a Sinn Fein member since he was 18.
"Last time I checked they were entirely committed to the peace process," he said.
Pointing out that a co-accused is a highly-regarded community worker, he contended: "One is dealing with the 'unlikely lads', to paraphrase the sixties and seventies comedy series.
"One (of the accused) is a community worker, the other is a card-carrying member of Sinn Fein."
But Mr Justice Treacy refused bail due to the alleged risk of re-offending and flight.
The judge said: "The crimes with which he is charged are clearly related to dissident republican activity.
"As the court has been informed and is well-known, there is an ongoing campaign."