Forces loyal to Libyan leader Muammar Gaddafi launched a new attack on the western town of Zawiyah on Saturday, with tanks shelling a rebel-held central square, residents said.

In a second day of fierce fighting for control of the coastal town, 50 km west of the capital Tripoli, government forces were forced to retreat to the outskirts early on Saturday but later mounted a counter-offensive.

'The fighting has intensified and the tanks are shelling everything on their way. They have shelled houses. Now they are shelling a mosque where hundreds of people are hiding, resident Abu Akeel told Reuters by phone. 'We can't rescue anyone because the shelling is so heavy,' he said.

Another resident in the main square said: 'The attack has started. I see more than 20 tanks.' Gunfire could be heard in the background.

A doctor in Zawiyah told Reuters at least 30 people, mostly civilians, had been killed during earlier fighting on Saturday, bringing to at least 60 people the death toll from two days of battles.

The centre of the town bore the signs of heavy fighting, with smouldering rubble, broken glass and one building completely torched, with bullet holes in the wall. In the central square four graves had been freshly dug.

The rebels fighting Gaddafi's 41-year old rule had earlier celebrated victory after beating back a government assault on Saturday morning. But Gaddafi's forces re-grouped on the outskirts of town, and al Jazeera reported that the government sent in reinforcements.

Residents said government tanks had fired at residential buildings and cars. 'More than 30 people have been killed today. The majority were civilians,' the doctor, who runs a field medical clinic in the centre of Zawiyah, told Reuters.

The noise of loudspeakers calling on rebels to keep on fighting could be heard through the telephone.

'There is a lot of destruction in the city, I look around and all I see is destruction. Bombed buildings and burning cars everywhere -- I cannot even count how many,' the doctor said.

Residents said Gaddafi forces stormed into residential buildings and killed people inside their houses to secure sniper positions on rooftoops. 'When we refused to allow them in, they killed my brother and they also killed my cousin,' Waleed, who gave only his first name, said.

'They slaughtered people,' said a resident who gave his name as Abu Mohamad. 'But we tell Gaddafi that every time a martyr falls, there will be ten to replace him,' he said.

During the fighting on Saturday, the rebels said they had managed to capture two tanks and three armoured personnel carriers from the army.

Inside a building which has served as the rebel central command in the town, the rebels presented six men they said were captured Gaddafi militia fighters.

Two of them were badly wounded, with one standing in a pool of his own blood which was dripping from his thigh. They waited in silence, looking terrified as the rebels checked their ID papers.-Reuters