For the first time in 10 years, Paraguay's Roman Catholic church is in open conflict with the military government after the reversal of a presidential decree authorizing members of an Indian tribe to reoccupy their land. The forcible explusion of 700 Toba-Maskoy Indians has led to renewed claims of genocide and to an appeal for the United Nations to suspend aid to Paraguay.

The affair is remarkable in two respects: It has stirred public indignation in a country normally indifferent to "the Indian question" and has revealed that President Alfredo Stroessner, for 27 years Paraguay's strongman, apparently was overruled by the intervention of three of his ministers.

In June, the Catholic Church and the National Indian Institute started legal proceeding to restore 25,000 acres in the Chaco plain to the Indians. The area formed part of Parawguay's biggest land holding, exploited until recently for tannin extraction by an Argentine firm, Carlos Cassado Co.

Stroessner signed the degree in October, authorizing the first legal expropriation of Chaco land for the benefit of Indians. Observers say the move was designed to placate foreign concern about widespread reports of brutal treatment of Indians.

After a series of delays, culminating in the sudden dismissal of the Indian institute's director, Col. Oscar Centurion, the Toba Indians finally were welcomed back to their homeland by the new director, Col. Machucha Godoy.

But the following day, according to the Asuncion newspaper Hoy, Col. Godoy returned with the minister of defense -- who is also president of the institute -- along with the ministers of public works and agriculture to announce the Indians' imminent explusion. The Toba were taken by military transport to a site about 60 miles away, where they are reported to be sufffering from malnutrition.

An open letter by church leaders and the staff of Indian agencies, received by Survival International in London, said, "Recent events give more credence than ever to the accusation of genocide." They described the Indians' present location as desolate and devoid of water and said they have no chance survival.

The letter appeals for international pressure to make Paraguay honor the original decree, which hs been negated by an "amendment," and for the suspension of U.N. aid. The United Nation Children's Fund has allocated $590,000 to the Indian institute, part of the estimated $6 million pledged as a result of concern about the plight of Paraguay's dwinding Indian population, estimated at 70,000 in a total population of about 3 million. The Catholic Church is to challenge the reversal in court next month.