Antonios Moussa could serve up to 20 years in jail if found in breach of weapons trafficking laws.
The 39-year-old was flagged by security at Sydney Airport on December 28 after X-ray scanning revealed a suspicious item in his checked baggage.
An inspection of the bag revealed parts of a disassembled shotgun along with ammunition, according to police.
AFP officers and airport security "acted quickly to ensure the safety of the travelling public". (Julian Smith/AAP PHOTOS)
Moussa had been set to fly to Lebanon but instead spent the next week in prison charged with trafficking prohibited firearms or firearm parts out of Australia.
He was reunited with a large group of his family and friends during a bail hearing on Tuesday.
While the facts of the alleged offence were "troubling", Moussa's lawyer said he believed the matter would be straightforward once his client enters a plea.
"It will be shown ... that the gun was inoperative. It had a ... broken stock," lawyer Stephen Stanton told the Downing Centre Local Court.
"It's an old gun, about 80 years old."
While accepting Moussa does not pose an unacceptable risk to the community, Magistrate Hugh Donnelly said a jail term could still be a real possibility due to the nature of the charge.
"A custodial sentence is likely in this case because of the way the offence is framed," he told the court.
He granted bail on conditions including twice-weekly reporting to police, leading Moussa's wife to break down in tears.
The court was told Moussa was a director of at least five companies, including wardrobing, carpentry and land development businesses.
While he did hold a firearms licence which was suspended upon his arrest, police allege the shotgun was not registered to him.
AFP Detective Acting Superintendent Dom Stephenson described the weapon allegedly found in Moussa's bag as having the potential to cause real harm.
"There was allegedly an initial claim that the weapon was a 'drenching gun' used for agricultural farming," he said.
"However, the AFP subsequently determined the weapon was a shotgun broken down into two parts."
"Security screening staff at the airport were vigilant and along with AFP officers, acted quickly to ensure the safety of the travelling public and stop weapons being taken offshore."
Moussa is due back in court at a later date.
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