By Ranga Sirilal

COLOMBO, Nov 28 (Reuters) - Sri Lanka's military fought a fierce artillery duel with Tamil Tigers in the island's restive east early on Tuesday, just hours after the rebels said they were resuming their two-decade independence struggle.

The military said the Tigers were using 152-mm artillery shells for the first time to target their forward defence line in the eastern district of Batticaloa, and had killed one soldier and injured two others.

"Our defence lines have been mortared and shelled," said Major Upali Rajapakse, a spokesman with the Media Centre for National Security. "They are using heavy, heavy guns. The army is retaliating with artillery."

Rajapakse said a convoy of 60 trucks, carrying around 600 tonnes of food aid for around 30,000 war-displaced, had to turn back because of rebel artillery fire.

The Liberation Tigers of Tamil Eelam (LTTE), who on Monday said they saw no other option than to resume their demand for an independent state and resume their struggle, said it was the military who had fired at them.

Shadowy Tiger leader Velupillai Prabhakaran, who had earlier pushed for a separate homeland for minority Tamils short of outright independence, called in an annual speech on Monday for international recognition of their struggle.

Analysts said that meant Sri Lanka should brace for more war.

"The uncompromising stance of Sinhala chauvinism has left us with no other option but an independent state for the people of Tamil Eelam," Prabhakaran said in his annual address. "Tamils are recommencing their journey on the path of freedom."

The Tigers spent much of their two-decade insurgency battling for independence, but scaled down their demand to a separate homeland within Sri Lanka after a 2002 truce, now lying in ruins but which both sides argue still holds on paper.

CEASEFIRE "DEFUNCT"

Prabhakaran said the ceasefire had become defunct and had been effectively buried by the government.

But the rebels told Nordic truce monitors on Tuesday they would not be the ones to formally end the ceasefire, which has been repeatedly violated by both sides. They did not say what methods they would use to achieve an independent state.

"They say they are not terminating the ceasefire agreement," said Thorfinnur Omarsson, spokesman for the Sri Lanka Monitoring Mission. "They accuse the government of damaging it."

President Mahinda Rajapakse has ruled out a separate homeland or independence, but says he is willing to consider widespread devolution of power within a united Sri Lanka. His government says it will continue to fight the Tigers if provoked.

Sri Lanka's two-decade civil war has killed more than 67,000 civilians, troops and rebel fighters since 1983, around 3,000 of those this year alone.

Ordinary Sri Lankans are divided over how the conflict should be solved. Some think the foes should decide it at the peace table, others on the battlefield. Many are afraid.

"We want peace. We have suffered enough because of the war and even today we are afraid to come to Colombo fearing that a bomb will explode at any moment," said K.D. Steven, a 54-year-old school bus driver.

"We take school children in our vehicles. It's a risk to take them in this situation. We are afraid to stop at a traffic light thinking a bomb could go off at any moment."

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