(Adds air raids)

COLOMBO, July 16 (Reuters) - Sri Lankan troops captured a strategically important coastal town from the Tamil Tigers, the defence ministry said on Wednesday, and government forces continued their push against the rebels' northern stronghold.

The ministry said the seizure of Vidattaltivu was a "fatal blow" for the Tigers who the ministry said used the northwestern town as the main base for its sea wing and western logistics.

Fighting in the 25-year civil war is now concentrated in the north after the Sri Lankan army, which has vowed to finish off the Tigers this year, drove the rebels out of their eastern enclave in 2007.

"Gallant soldiers of Army 58 Division and Commando Brigade have liberated the strategically important Vidattaltivu town this morning," the defence ministry said in its website http://www.defence.lk.

It said it was the first time Sri Lankan troops had held the town since an Indian peacekeeping force departed in 1990.

The air force for its part said gunship helicopters had attacked and destroyed two rebel boats in the islands north western sea on Wednesday, while fighter jets bombed a rebel gathering in the north western district of Mannar.

The Tigers, fighting for an independent state in north and east Sri Lanka for ethnic Tamils, a minority in the predominantly Sinhalese country, were not immediately available for comment.

Analysts say the military has the upper hand in the latest phase of the long-running war given superior air power, strength of numbers and swathes of terrain captured in the island's east, though they still see no clear winner on the horizon.

An estimated 70,000 people have died since the civil war began in 1983.

The Tigers regularly retaliate with suicide attacks that increasingly target civilians and roadside bombs, experts and the military say, deterring some tourists and worrying investors in the $27 billion economy. (Reporting by Ranga Sirilal; Editing by Jon Boyle)

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