Mark Anthony Norwood, a parish councillor and regional organiser for
the Shropshire BNP, was prosecuted after a passer-by said he was 'felt quite sick' at the sight of the poster which urged 'Islam out of Britain'.
The poster was one of 10,000 run off by the BNP and circulated to members in the wake of the 11 September terror attacks.
It showed a photograph of the twin towers in flames and urged supporters to 'Protect the British People', also depicting the Muslim symbols of Crescent and Star surrounded by a prohibition sign.
Mr Norwood, from Gobowen, Shropshire, was fined £300 by a district judge last December for a 'religiously aggravated' offence under the 1986 Public Order Act.
The poster, the judge said, was 'abusive and insulting to Islam' and was 'likely to cause harassment, alarm or distress' to those who saw it.
Despite Mr Norwood's plea that the conviction violated his rights of free speech enshrined in the Human Rights Convention, two judges at London's High Court dismissed his appeal.
He argued the case had raised issues of 'general public importance', but was refused leave to appeal to the House of Lords.
Lord Justice Auld said the district judge had been entitled to find that Mr Norwood had displayed the poster in the window of his first-floor flat in the small village 'intending it to be, or at least aware that it might be, insulting.'
The words, photograph and symbols on the poster 'were clearly racially directed and racially insulting,' he added.
'The poster was a public expression of attack on all Muslims in this country, urging all who might read it that followers of the Islamic religion here should be removed from it and warning that their presence here was a th reat or a danger to the British people.
'In my view, it could not, on any reasonable basis be dismissed as merely an intemperate criticism or protest against the tenets of the Muslim religion, as distinct from an unpleasant and insulting attack on its followers generally.'
The judge, sitting with Mr Justice Goldring, said it was 'plain common sense' that the poster was 'capable of causing harassment, alarm or distress to those passing by who might see it in his window.'
Police went to Mr Norwood's flat after a member of the public, Karl Davies, who was accompanied by his eight-year-old son, reported him, saying he 'felt quite sick' at the sight of the poster.
The district judge convicted him despite evidence in his defence given by BNP chairman, Nicholas John Griffin, who said he did not consider the poster 'offensive or emotive' and that it had been intended as a 'slogan against creeping Islamification'.
Claire Miskin, for Mr Norwood, had told the High Court he was 'entitled to the right of free speech the same as everybody else, regardless of what sort of political party he comes from.'
Freedom 'only to speak inoffensively' was not worth having, she argued.
Although 10,000 copies of the poster had been printed by the BNP, some of
which had been used in a demonstration in Parliament Square in London, there had been no other prosecutions, she told the court.
At Mr Norwood's trial, a police officer said he felt the poster was 'in bad taste and inflamatory' and that, having worked in London, he had seen the kind of violence 'this sort of material' could stir up.
STRAND NEWS SERVICE