Lord Justice Scott asked why it was 'necessary in order to protect the public good' to have a system which prevented disclosure of documents 'which in themselves do no damage to the public'. Some documents the Government sought to withold would have had a 'trivial impact', he said.
In Parliament, Paddy Ashdown, the Liberal Democrat leader, challenged John Major to say whether he agreed with the judge's comments. Mr Major declined to comment until after Scott reported.
The latest revelations will further infuriate ministers, who are privately expressing anger at the way the inquiry is being carried out. One accused Lord Justice Scott of 'theatrics to stitch up the Government'. Some believe that his report, expected in August, will be so damaging that it could force Mr Major to postpone a ministerial reshuffle planned for July.
Mr Rifkind admitted signing a PII claiming disclosure would be 'injurious to the running of the public service' and not in the public interest. Tristan Garel-Jones, the former Foreign Office minister, signed another which warned 'unquantifiable damage' would be done if documents were revealed.
In spite of such claims, when the trial judge rejected their arguments and ordered documents be released, officials wrote 'they could live with this'. When more sensitive intelligence material was revealed, officials said there was 'still nothing of such sensitivity to consider asking Customs to discontinue the prosecution'. The disclosure decision led to the case against three businessmen collapsing in November 1992.
Presiley Baxendale QC, inquiry counsel, asking how officials' comments squared with the PII claims, said: 'It makes one wonder what weight can be given to your words.'
Mr Rifkind insisted the Government had a duty to protect its documents and preserve the confidentiality of advice to ministers.
He said he was familiar with the PII system and had signed a previous certificate. He signed after satisfying himself the documents fell within a category that required protecting, but admitted he did not ask himself whether disclosure would harm the public interest.
The hearing continues today.