Why not? Refused Classification (banned) is just another rating, it's the rating a product gets when the content is at such a high level it falls outside of all other ratings. The reason some games get the RC rating in Australia isn't because we have a ratings systems that is harsher than other western countries, as we don't, it's because unlike film and literature there is no adults only (R18+) rating, so games that would meet the R18+ standard have to be refused classification until the content is modified.
Games may or may not be art, but they are mass produced products, and like any product if something about it is believed to be harmful then restrictions will apply.