Spencer Vaughan, 27, of Campbell Road, Plymouth, suffered spinal damage after hitting his head on a sand bar in Gran Canaria while on a training course.
He is seeking damages from the MoD for not warning about the dangers of diving into shallow waters.
Mr Justice Davis will give his ruling at a later date.
Mr Vaughan, who comes from Cwmbran, South Wales, is now an incomplete tetraplegic following the accident in 2009 and gave evidence from his wheelchair at London's High Court.
Mr Vaughan insisted he was "on duty" when he walked into the sea to "cool off", executing a shallow, surface dive as the waters reached waist height.
Malcolm Sheehan QC, for the MoD, suggested to Mr Vaughan that he and his comrades were simply "chilling out" on the beach.
"It is unrealistic to say that you were on duty because you had a free choice about how to spend your time", the barrister said.
The QC referred him to "other accounts" which suggested that he "ran into the water and then carried out a Baywatch-style dive".
Mr Vaughan agreed that he and his fellow marines were "relaxing and chilling out", but said their primary purpose was to exercise and to swim.
Mr Vaughan said he had walked carefully into the water to avoid a young family in front of him.
Mr Sheehan said he had "every sympathy" for Mr Vaughan's plight, but added: "On the facts of this case there is no basis for a finding of negligence on the part of the MoD."
Mr Justice William Davis has now reserved his judgment on the case and will give his ruling at a later date.
A Royal Marine who is suing the Ministry of Defence for up to £8m, has denied that he broke his neck performing a "Baywatch-style" dive.