The two faces of Israel were graphically illustrated for a jury here today in court testimony that laid bare many of the quarrels in the bitterly divided Israeli society.

If on one level the $50 million suit former Israeli defense minister Ariel Sharon has brought against Time Inc. is a simple libel case turning on the narrow issue of whether the publishing company defamed him in a February 1982 magazine article, it is also something of a political trial.

The lines in the case were never so sharply drawn as they were today, when Sharon ended his seventh day on the witness stand and was followed by David Halevy, an Israeli citizen and correspondent for Time.

Sharon spoke with some traces of anguish about how he had been vilified around the world and had lost his post as defense minister after Israel's Kahan Commission determined that he bore indirect responsibility for the massacre of hundreds of Palestinians at two Beirut refugee camps in September 1982.

"I felt that I was punished without committing any crime," Sharon said. "I didn't commit any crime."

Testifying later, Halevy said of Sharon: "He is a politician incapable of being a statesman. He is a ruthless leader. His ambition for power is naked and he is causing tremendous damage to the state of Israel and his own environment."

If Sharon is the exemplar of a hard-line, uncompromising approach, Halevy comes out of an older, more moderate tradition in Israel. In college in the 1960s, he was an activist and publicist for a political party that was a forerunner to the now staunchly anti-Sharon Labor bloc. Before joining Time, he had worked as an aide to Deputy Prime Minister Yigal Allon in a Labor government and had been a party operative for Golda Meir before she became prime minister.

Halevy, summoned as "a hostile witness" by Sharon's lawyers, said that Sharon had been his boyhood hero and that he had deep respect for Sharon's technical and political abilities until Israel's invasion of Lebanon in June 1982.

Halevy said he came to see Sharon as a "politician without principle, with no ideology . . . ."

When Milton S. Gould, Sharon's attorney, suggested that some Israelis disagree with that assessment, Halevy replied, "Half of the country." He cited opinion polls showing how polarized Israeli citizens are in their views of Sharon.

Earlier, Sharon had described how his hopes for a peace treaty between Lebanon and Israel had turned to ashes and how his reputation had been damaged in the outcry that followed the massacres by Lebanese Christian Phalangist militiamen that he had allowed into the two Beirut refugee camps.

"Politically, it was very bad for us -- that tragic event that happened," Sharon testified. "That harmed us from the point of view of public relations in the world. Harmed us terribly."

"That even gave a chance to the political opposition," he said. He accused his Likud Party's rival, the Labor bloc, of whipping up antiwar protests and demonstrations in which Sharon was reviled as a "monster." The Time article produced "a new wave of hatred" against him, he said.

A Sharon friend, Ehud Olmert, testified that he felt that Sharon could have bounced back from the political setback caused by the Kahan Commission's findings that Sharon should have foreseen the possibility of massacres. But, Olmert said, the Time report suggesting deeper involvement in the killings had hurt his chances. Olmert is a Likud Party member of the Knesset, Israel's parliament.

Gould sought to depict Halevy as a careless journalist with a strong personal and political bias against Sharon.

He began questioning the correspondent today about a 1980 incident for which Time put him on one year's probation. Halevy had written a story saying then-Prime Minister Menachem Begin was ill and had been taken to a secluded spot in Israel for examination by a three-member team of foreign doctors.

After Begin complained to Time that the report was inaccurate and after Time conducted an investigation, the magazine published an apology and correction.

In other testimony today, Uri Dan, a longtime friend and former press adviser to Sharon who is the New York Post's Middle East correspondent, testified that he had accompanied Sharon on a condolence call on Lebanon's Gemayel family after the assassination of Phalangist militia leader Bashir Gemayel. The visit came the day after Gemayel's death and the day before the massacres began.

Dan said Time's story that Sharon had discussed the need for the Gemayels to take revenge for Bashir Gemayel's death was inaccurate.

In Israel today, the Supreme Court denied Time's request to subpoena a secret appendix to the Kahan Commission report, which Time, in the disputed article, said contained details of Sharon's conversation with the Gemayels the day before the massacres.

The court in Israel also rebuffed Time's efforts to summon top-ranking military officers to testify in the case, on the ground that it could compromise Israeli security.