Outgoing defence chief Admiral Chris Barrie said it was scandalous that some people believed the Australian Defence Force (ADF) left hundreds of boatpeople to drown.
Admiral Barrie, who hands over command of the ADF to General Peter Cosgrove at midnight, said defence could not be held responsible for the deaths of 353 people aboard an asylum seeker boat known as SIEV-X that sank en route to Christmas Island last October.
In a hard-hitting speech at his official farewell ceremony - an occasion traditionally reserved for tributes - he said the ADF always stood ready to help people in distress.
"However, we can only affect rescue when we are aware there is a vessel in distress," he said.
Admiral Barrie said the testimony of senior officers before Senate estimates committees had been incorrectly construed by some to imply that defence deliberately pulled back aerial surveillance in mid-October.
"In fact we continued to survey the area and we did not pull back the surveillance as suggested," he said.
"None of the surveillance detected the SIEV-X vessel.
"I am scandalised that some people seriously believe that we somehow changed our modus operandi to deliberately avoid detecting this vessel."
Admiral Barrie's farewell function, after four years as defence chief and 41 years in the ADF, was marked by a large turnout of dignitaries, a 17-gun salute and a flypast by four F/A-18 Hornet fighters.
Admiral Barrie now heads off to lecture in management at Oxford University, UK.
But before leaving, he paid tribute to the men and women of the ADF, declaring they would be in good hands under General Cosgrove.
"In all our operations the men and women of the ADF have never let me down," he said.
"To see our people in action is to know how good they are and frankly this perspective inspires me to be confident about Australia's future.
"They are all damn good."
Defence Minister Robert Hill said Admiral Barrie had provided the government with military advice on some 47 military operations.
"In every instance, the advice to government was carefully considered and sound," he said.
"In every instance the exercise of his command of the force was exemplary."
Senator Hill said General Cosgrove, a Vietnam veteran, was once quoted telling a group of schoolchildren that war was not glamorous and was a shameful, nasty business.
"A general who sees war in such terms is the sort of general I want to see leading Australia's armed forces," he said.
Defence Department secretary Dr Allan Hawke said East Timor was the pinnacle of Admiral Barrie's career and he was instrumental in raising the operational readiness of ADF combat forces in preparation for the mission.
"Without that decision, Peter Cosgrove could not have done what he did as commander of INTERFET. Chris provided the tools. Cos finished the job," he said.