United Patriots Front members Blair Cottrell, 27, Christopher Shortis, 46, and Neil Erikson, 32, have pleaded not guilty to inciting contempt, revulsion or ridicule of Muslims in a video made in protest at plans to build a mosque in Bendigo.

The video, filmed outside the City of Bendigo offices on October 4, 2015, features Mr Cottrell speaking to camera about the mosque plans and directing Mr Shortis and Mr Erikson to decapitate a dummy with a toy plastic sword.

When the dummy is beheaded, red liquid spills onto the footpath.

Prosecutors allege the video was designed to incite hatred of Muslims in the days before a rally held in Bendigo opposing the mosque. The rally date was shown on the video.

The three men have also pleaded not guilty to defacing a footpath and garden bed and wilful damage, which stand as alternative charges to the incitement offence.

They are representing themselves in Melbourne Magistrates Court.

On Tuesday they told magistrate John Hardy their video was not intended to insult Muslims, but to highlight beheadings as a danger of the religion, as they are carried out by fundamentalists claiming they act in the name of Islam.

"We made a political statement on the dangers of Islam by focusing on a tenet of [the religion]," Mr Shortis said.

"The state is effectively trying to defend what is an unlawful act under Australian law."

Mr Shortis said videos of actual beheadings prompted global revulsion but it was not illegal to be aware of beheadings.

He defended people's rights to express opinions as part of a "robust" public discussion.

"It is extraordinary that in 2017 a state that is supposed to be consistent with the Commonwealth can be offended on behalf of a religion," he said.

"No Muslim has made a complaint [about the video]. This is the elephant in the room."

The video was posted on the UPF's Facebook page, the court heard, but Mr Cottrell said it was possible for other web users to see it.

What conclusions they made, he said, were out of the three men's hands.

Mr Cottrell said a dangerous legal precedent would be set in Victoria if he and his co-accused were convicted.

Prosecutor Fran Dalziel said the accused men were "imputing" acts of terrorism to Islam by depicting a beheading, and by doing so were "seeking to stir up or stimulate" feelings of revulsion towards Muslims.

"To suggest that building a mosque would bring terrorists in Bendigo is trying to incite hatred," she said.

"What is being critiqued is Muslims as a whole and all practitioners of that religion."

The fact the council had to clean up the red liquid showed the men's actions caused damage, Ms Dalziel said, even if it wasn't permanent.

Mr Erikson said it was never the trio's intent to cause damage, as they filled the dummy with a water-based liquid.

"My intention was not to insult Muslims at all. My intention was to be comical," he said.

The three had planned to give evidence on Tuesday, but instead chose not to and made submissions from the bar table. The hearing continues.

The High Court last year dismissed a final legal challenge against the mosque, paving the way for it to be built.