* Rebels kill soldiers after heavy army shelling

* Observatory says 23 soldiers killed, rebels say 9 dead in shelling

* Control of Rastan has changed hands several times

AMMAN - Rebels killed 23 Syrian soldiers on Monday, according to a rights group opposed to President Bashar al-Assad, in battles around the town of Rastan that further undermined a sagging UN-backed ceasefire.

The fighting on the outskirts of Rastan followed heavy army shelling of the town in which opposition sources said at least nine people were killed, including a local rebel commander.

Rastan, 25 km (15 miles) north of Homs city, has slipped in and out of government control several times since the uprising against Assad erupted in March 2011.

Shelling began on Sunday and intensified overnight, activists said, a new blow to a ceasefire declared by peace envoy Kofi Annan a month ago and which UN monitoring mission on the ground are observing.

"Shells and rockets have been hitting the town since three am (midnight GMT) at a rate of one a minute. Rastan has been destroyed," a member of the rebel Free Syrian Army (FSA)in Rastan who declined to be named told Reuters by satellite phone.

He said among those killed was Ahmad Ayoub, an FSA commander whose fighters were battling the army forces which he said were made up of elite units and members of Military Intelligence.

The British-based Observatory said fighting began at dawn on Monday and that rebels destroyed three armoured personnel carriers and seized two others, capturing around 15 soldiers.

Syria's uprising began as a peaceful protest movement but has become increasingly militarised as rebels fight back against Assad's violent crackdown. Syria restricts media access, making it difficult to verify accounts of the unrest.

Syria's Sunni majority is at the forefront of the uprising against Assad, whose minority Alawite sect is an offshoot of Shi'ite Islam. Assad's government says it is fighting a terrorist attempt to divide Syria.

DIPLOMACY

Rastan has in the past been a major source of Sunni Muslim conscripts who provide most of manpower in the military, which is dominated by Alawite officers.

Sunni officers from Rastan began defecting after security forces shot dead dozens of demonstrators in the town and arrested many of its notables.

The area was scene of the first serious armed confrontations

between army defectors and loyalist forces last year. Assad's forces regained control of the city several times but it has kept falling back into rebel hands.

Its strategic location and the terrain has helped deserters from disparate units mount raids against army buses and roadblocks manned by Military Intelligence and pro-Assad militia, opposition activists said.

Rastan lies about 180 km (110 miles) north of Damascus, among farmland and wheat fields on the Orontes River and on the northern highway leading to Aleppo.    

UN Secretary General Ban Ki-moon said on Wednesday there was only a narrow window of opportunity to avert full-scale civil war in Syria, which sits at a crossroads of Middle East conflict bordering Turkey, Jordan, Israel, Iraq and Lebanon. Its 23-million population comprises a mix of faiths, sects and ethnic groups whose tensions resonate in neighbouring states.

The United States, Europe and Gulf Arab states want Assad to step down but his ally Russia has blocked more robust action against the Syrian authorities in the U.N. Security Council and remains firmly behind Annan's six-point peace plan.

Western powers have no appetite for a repeat of the military intervention that helped Libyan rebels topple long-time ruler Muammar Gaddafi last year, and Moscow says arming Assad's opponents would only lead to years of inconclusive bloodshed.