Colombo (AFP) - Government forces on Friday wrested control of a strategic town after heavy fighting with Tamil Tiger rebels that left at least 40 people dead, the defence ministry said. Security forces entered the town of Mulliyawalai near Mullaittivu, the main military headquarters of the Liberation Tigers of Tamil Eelam (LTTE), the defence ministry said. "Troops are now engaged in a fierce gun battle with the LTTE in the area," the ministry said in a statement. It said the Tigers had suffered heavy losses but did not give details of the latest fighting. In an earlier statement, the ministry said troops shot dead at least 40 Tamil Tiger rebels and beat back counter-attacks by the Tigers on Christmas Day. Those clashes erupted Thursday along at least three fronts outside the town of Kilinochchi, the besieged political capital of the LTTE, the ministry said. Kilinochchi and Mullaittivu are the two remaining big towns still under rebel control in the north of the island. The ministry said snipers killed 28 rebels in two places while another 12 rebels were killed and 18 more wounded in the third clash around Kilinochchi. The military did not say if security forces suffered any casualties. "The LTTE terrorists have tried several times to recapture the lost areas," the ministry said, referring to running battles with the guerrillas along their Kilinochchi defences. There was no immediate comment from the Tigers. The Tigers said Monday they had killed more than 100 soldiers and had taken back territory lost to advancing government forces. Both sides are known to make exaggerated claims about casualties they have inflicted on each other and independent verification is virtually impossible as journalists and aid workers are barred from the conflict area.