The government-appointed Commission of Inquiry is investigating hundreds of millions of dollars in illegal payments made to the former Iraqi regime by three Australian companies under the UN oil for food program.
Wheat exporter AWB accounted for nearly all of that money.
The commission hear that Melbourne-based Rhine Ruhr supplied almost US$200,000 (A$265,622) worth of components to Iraq's oil industry under the oil-for-food program.
Counsel assisting the inquiry, Michael Wigney, said Rhine Ruhr paid more than ₤11,000 (A$26,000) in "after sales service fees" demanded by the Iraqi government.
The company then hid its actions by failing to detail the payments in contracts approved by the UN and the Department of Foreign Affairs and Trade (DFAT).
"(The fee) was plainly designed to extract funds from the UN escrow account for payment to the Iraqi government in circumvention of the sanctions regime," Mr Wigney told the inquiry.
"There is no evidence to suggest that either DFAT or the UN were informed about the fee," Mr Wigney said.
Saddam's regime demanded the kickbacks from more than 2,000 companies around the world who were supplying goods under the oil for food program.
The system was a way of illegally collecting money for the bankrupt regime and evading UN sanctions imposed after Iraq's troops invaded Kuwait in 1990.
Rhine Ruhr paid the money through UK agent, Tony Davies, of a company called Eastoff Hall Limited, who referred to the fee imposed by Iraq as an "engineering services fee".
Rhine Ruhr entered into a contract in 2001 with Iraq's Northern Gas Company, which was controlled by the Iraqi Oil Ministry, to supply "trays for regenerator towers".
The contract price was ₤125,000, but included the 10 percent kickbacks "service fee" levied by the Iraqi government.
Mr Wigney said contract documents never revealed the kickbacks.
"None of the documents sent to the UN or DFAT disclosed in any way the fact that 10 percent of the contract price represented a fee or impost of some sort to be paid to either the Northern Gas Company or any other Iraqi company or government ministry or instrumentality," Mr Wigney said.