A Church of Scientology offshoot, the Association for Better Living and Education, appealed to the Victorian Civil and Administrative Tribunal, after  a unanimous Yarra Ranges Council decision to refuse it a permit to operate its drug treatment program from a central location in Warburton.

The controversial international program, Narconon, has operated from a secluded site in East Warburton since 2002. The facility was set to move to a central site that abuts seven residential properties, and is 300 metres from a local primary school. The application drew almost 300 objections from local residents.

ABLE applied for a permit after purchasing the $1.2 million site, but the council rejected it, arguing the program would threaten the community's safety.

The Narconon program has been associated with deaths in the United States  and Europe, and has been banned in Quebec. The program's non-medical practices are contentious in drug rehab circles, particularly the detoxification process, which involves weeks of five-hour-long sessions in a sauna and mega-doses of niacin and other vitamins.

The Warburton case follows a similar dispute in NSW, where the Wyong Shire Council rejected a permit application for the same treatment facility in Yarramalong Valley due to risks associated with its flood-affected site.

In a decision handed down on Thursday, VCAT members ruled the residential site was an inappropriate location for the centre, due to the program's insufficient security and management regime. It also ruled that the program was not an education centre, as ABLE proposed in the permit application, but fundamentally a drug and rehab centre.

Information obtained through freedom of information data by local objectors shows 26 police callouts to the centre since 2005, including an incident in which a student threatened staff with an axe, a psychotic offender threatening to kill and an offender detoxing off heroin and ice harassing neighbours.

The dispute in Warburton has brought into question the controversial practices of Narconon.

Local objectors, who formed the campaign "Say No to Narconon", raised concern about the lack of professionalism of the staff, the program's unscientific treatment practices, and they questioned its advertised 75 per cent success rate.

The program's critics have called for increased accountability and performance reviews of the drug and rehabilitation sector. There is currently no requirement under Australian law to seek a licence to run a drug and rehabilitation centre.

Local campaigner Lindy Schneider posed: "Beyond the planning scheme where is our cover? Our recourse? Our backstop?"

Senator Nick Xenophon, the force behind a Senate committee investigation highlighting activities of the Church of Scientology in 2010, said drug rehabilitation programs must be subject to government oversight.

"These are incredibly vulnerable people ... we need to make sure the base level of accreditation is sought and to start ensuring we have the world's best practice in drug rehab."

The program costs about $30,000 for a six-to-nine-month stay – plus $260 weekly fees for board.

Narconon staff are trained internally, learning from the program's own curriculum.

Ninety per cent of the program involves intense study, based on the teachings of the Church of Scientology's founder, L. Ron Hubbard.

Executive director of the organisation running the program Andrew Cunningham said the drug treatment program was fundamentally educational.

"Our program is 90 per cent educational as it addresses why the user took drugs in the first place and deals with this.

"People who enter our program are off drugs and are there of their own free will and have paid for the program (no government funding received)."

He said he was reviewing the tribunal's decision and remained "firmly committed to resolving the serious scourge of drugs on society".

The program will continue to operate at the existing facility in East Warburton.