Arab villagers produced documentary evidence today that appears to contradict Israeli government assurances Sunday that no privately owned Arab land is being used for a new Jewish settlement near here.

The Palestinian Landowners challenged the Israeli Cabinet's assertion that only so-called state land or public domain land formerly owned by the Jordanian crown, will be used for expansion of Jewish settlements and for the new urban community of Efrat.

Cabinet spokesman Aryeh Naor said Sunday that the Cabinet had agreed that only "state land" was being used and that the Israeli government would not "seize one inch of private land" for the settlements.

The Palestinians contend, however, that privately owned Arab land already had been seized by the government and is now being developed, behind fences, for the new community of Efrat.

The villagers showed me copies of expropriation orders issued on March 22, 1979, and they showed tracts of cultivated land that have been fenced off by Israeli authorities for the development of the Efrat settlement.

Two of the Palestinian farmers then accompanied me to the property tax registration office in nearby Bethlehem, where there is documentary evidence that they had paid taxes on their parcels of farmland.

But because their property, like most rural land in the West Bank, has not been surveyed and deeded, they said they feared they would lose their land to the Efrat settlement.

Indentical notices from the absentee property office in Bethelhem were sent to at least 22 Arab Landowners here informing them they can seek compensation for land expropriated for security purposes, according to the local muktar, or headman.

When the government decided on Sunday, to expand six existing settlements and build the new Efrat outpost, it voted unanimously against expropriating any private land, thereby averting a crisis in Prime Minister Menachem Begin's Parliamentary coaltion. Foreign Minister Moshe Dayan had threatened to resign if private land were seized, and several other ministers were equally adamant in their opposition to expropriation.

The cabinet at first said it would seize only state land, which comprises about 250,000 acres of the West Bank's 1.4 million acres, but the government later said its definition of state land includes undeeded property that has not been cultivated for the past 10 years. The government gave no indication that private land may already have been seized and it has said nothing more about rescinding such seizures.

In a tour of the approximately 500 acres earmarked for the Efrat settlement, the Arab landowners pointed out a barbed-wire fence erected by Israeli authorities that cuts directly through several grape arbors. All land within the fence is legally "closed," meaning it is controlled by the military governor, although the farmers said they had been told they could harvest their crops this year.

Two of the farmers, Mohammed Hussein Said, 44, and Mousa Mohammed Mousa, 36, both from this village of 4,000 persons, said that the land has been held by their families for generations, but that they had no documentary evidence on hand to prove it.

At my request, they accompanied me to the tax registration office and applied for a certificate of ownership, the first step in a complex series of legal moves to obtain and register a deed.

The registration ledgers in the Bethlehem office showed that Said's father, Hussein Said Mahmoud, had registered 41 dunams (about 10 acres) in the tract slated for Efrat, and that Mousa's father, Muhammed Mousa Mahmoud, has registered 57 dunams (about 14 acres) in the same tract.

The records showed that the Said and Mousa families had paid taxes on the plots to the Jordanian government until 1957, when the parliament in Amman passed a law exempting West Bank landowners from tax if there was no water on the property. Israel has not collected land taxes on such property since it occupied the West Bank in the 1967 war.

Ali Osman Mousa, a muktar of the village, who said he also received an expropriation order for cultivated land in the Efrat tract, went to the property tax registration office with me and the El Hadr villagers.

He said that the two families had continuously cultivated the seized land for several generations and that under Jordanian law, they were the rightful owners of the plots. In civil matters, Jordanian law still prevails in the West Bank.

However, in order to obtain a legal deed from Israeli officials, the farmers would have to have the land surveyed and then produce in an Israeli court proof of tax registration and other documents indicating that ownership was recognized by either the Jordanian government or the prior regimes of the British mandatory authority or the Ottoman sultan.

When asked why they had not previously applied for deeds the two farmers said the process was a long and costly one, and that moreover, in the past Isaeli authorities have expropriated deeded land without hesitation. As a result, they said they felt obtaining deeds was not worth the cost and effort.

Earlier this year, however, two Arab landowners from the nearby village of Beit Fajar did appeal to Israel's supreme court and obtained a restraining order prohibiting expropriation of their land for Efrat, about 315 acres are claimed by residents of El Hadr, which is several miles north of the settlement site.

Moshe Moscowitz, director of the development firm building Efrat, said a study of the land registry produced no proof that Arab villagers own the 500 acres involved. He apparently was referring to the registry of deeds however, and not the property tax registration.

A spokesman for dayan said it is the foreign minister's understanding that no cultivated land will be seized -- "no cultivated land, whether or not [deeded] ownership can be proved."