Associated Press Photo/ Vidon, Pool East Timorese burn an Indonesian flag infront of a military headquarters in Dili. Indonesian soldiers evacuated the compound yesterday. The army is evacuating East Timor and handing over control to the peace keepers.

DILI, East Timor - Gunfire crackled across East Timor's chaotic capital yesterday, sending civilians scrambling for shelter and peacekeepers for their rifles in what was seen as a test of multinational authority in the province.

Though the shooting was not an attack, it prompted the commander of the peace mission, Maj. Gen. Peter Cosgrove, to warn that his men would use "lethal force'' against anyone who even pointed a weapon at them.

Three truckloads of Indonesian soldiers, apparently resentful at losing East Timor in a referendum on independence, unleashed bursts of automatic fire as they drove through the Australian- and British-controlled sectors of Dili.

No one was hurt, and the soldiers were not caught. But the incident demonstrated how jittery the multinational troops are as they face the prospect of deadly confrontations with anti-independence militias.

The body of a Dutch journalist was found in a Dili suburb Wednesday, the first foreign casualty since the multinational force began arriving.

The Indonesian army, which invaded East Timor in 1975 after Portugal abandoned its former colony, is now evacuating and handing control over to the multinational force.

The peacekeepers began entering East Timor this week, with about 3,000 soldiers on the ground as of midday yesterday and 4,500 yet to come.

Cosgrove warned the militias against provocation.

"If they carry those weapons openly, if they point them at any other East Timorese or at my soldiers, then we will use lethal force against them,'' he said bluntly. "That time is possibly not far away.''

Cosgrove said he would try to speed up deployment of troops still at the staging point in Darwin, Australia. He has admitted he does not have enough troops to secure all residential areas of the capital.

Brig. David Richards, commander of the British contingent, said the men who fired their weapons in the air wanted "to see what our response drills are like. They are probing our responses. It is a test.''

They also wanted to create fear and show the peacekeepers have less control over the city than the Indonesians did, Richards said.

In Jakarta, the Indonesian Justice Minister Muladi announced yesterday martial law had been revoked in East Timor and the responsibility for security would be handed over to the multinational force. The government had imposed martial law on Sept. 7 after the rampage began.

Cosgrove said he had reports militias who wrought havoc on East Timor were massing across the border in the Indonesian province of West Timor. He said he is closely monitoring those groups, but his troops have no authority to operate in West Timor.

In Geneva, the U.N. Human Rights Commission held an emergency meeting yesterday to discuss alleged abuses in East Timor. The European Union called on the session to send an international commission to the province to gather evidence of war crimes.

At the United Nations in New York, Indonesian Foreign Minister Ali Alatas rejected suggestions for an international investigation into possible war crimes, saying Indonesia itself should first look into allegations of human rights violations.

Hundreds, perhaps thousands, of people were killed when the militias went on a rampage of killing and looting after the referendum on independence, in what human rights groups say was an operation orchestrated by the Indonesian military to annul the vote.

U.N. personnel took a two-hour helicopter tour yesterday of the towns of Ainaro, Same, Suai, Ermera, Liquica and Maliana, and found them almost completely deserted and half destroyed, U.N. spokesman Fred Eckhard said in New York.

Between 190,000 and 300,000 people fled into the mountains and other areas during the violence, in addition to 141,000 who fled to Indonesian-controlled West Timor, according to a UNICEF report.

U.N. workers warned yesterday the international community has only a few weeks to get food to starving refugees before the rains ground flights and bog down roads.

Evidence of atrocities was beginning to emerge in Dili, which has been virtually razed.

In central Dili, reporters were shown a water well where eight dismembered bodies were found. Residents said as many as 30 victims were thrown in the well after being tortured.

Domingos Xavier, pointing to meat hooks hung from the rafters of a nearby house, said: "These were used to hang people with cloth tied around their necks.''

A woman claimed sacks containing body parts from the house were thrown in a nearby sewerage drain.

One of the main militia groups, Aitarak, had its headquarters at the Hotel Tropical three doors away.

Even yesterday, arson continued in Dili. Smoke billowed from a large government building recently evacuated by Indonesian troops.

Determined not to leave anything behind, soldiers vandalized and set fire to their barracks before departing, leaving behind live ammunition to explode in the heat.