Whether its a defect or not depends on which state you are in, in QLD you are allowed one, just needs to be secured with a bracket so its not bouncing around, and i believe in Melb you are only allowed one intake mod (corrections?) so its either a pod of FMIC.
With regards to concealing it, there are a heap of tutorials on creating a pod filter box/CAI in the tutorial/fabrication sections, most of which can be made to look fairly stock so it wont attract attention if/when being inspected.
That said, you can always just go for a high flow panel filter in the stock air box (you would obviously need to source a stock air box first)
-Steve