BAGRAM, Afghanistan (Reuters) - Life as 8-year-old Razia knew it ended one March morning when a shell her father says was fired by Western troops exploded into their house, enveloping her head and neck in a blazing chemical.

Now she spends her days in a U.S. hospital bed at the Bagram airbase, her small fingernails still covered with flaking red polish but her face an almost unrecognisable mess of burned tissue and half her scalp a bald scar.

"The kids called out to me that I was burning but the explosion was so strong that for a moment I was deaf and couldn't hear anything," her father, Aziz Rahman, told Reuters.

"And then my wife screamed 'the kids are burning' and she was also burning," he added, his face clouding over at the memory.

The flames that consumed his family were fed by a chemical called white phosphorous, which U.S. medical staff at Bagram said they found on Razia's face and neck.

It bursts into fierce fire on contact with the air and can stick to and even penetrate flesh as it burns.

White phosphorus can be used legally in war to provide light, create smokescreens or burn buildings, so it is not banned under international treaties that forbid using chemicals as weapons.

Colonel Gregory Julian, a spokesman for the commander of U.S. and NATO forces in Afghanistan, General David McKiernan, confirmed that Western forces in the country use the chemical.

"In the case of white phosphorus it is used on the battlefield in certain applications ... It is used as an incendiary to destroy bunkers and enemy equipment; it's used for illumination."

But U.S. military training manuals say firing it at people is illegal. Its use in populated areas has been a persistent source of controversy.

Razia and her family are the first known civilian casualties of its use in Afghanistan.

WHO FIRED?

Rahman said the shell that burned his daughter landed after a firefight near their house in the eastern province of Kapisa. The NATO-led international force there is made up mainly of French troops, with U.S. support.

"(Western) troops were on the road, the Taliban were on the mountain and we were at the house, sandwiched between them. When the Taliban began retreating, they fired artillery at them, 12 rounds. One hit my house," Rahman said.

A spokeswoman for the NATO-led force rejected Rahman's account, saying an internal investigation into the incident concluded that it was "very unlikely" the weapon that hit Razia's house was theirs, because of the timing and location.

U.S. Major Jennifer Willis suggested instead that the Taliban had fired the shot: "An enemy mortar team, known to have been operating in that area, may have been responsible".

The Afghan government, military specialists and experts on the Taliban told Reuters, however, that insurgents have never been observed using white phosphorus. The only forces on the battlefield known to use it are the United States and NATO.

"I am not aware that the Taliban have used this in any of their attacks," said Zaher Murad, a Defence Ministry spokesman.

Ahmed Rashid, Pakistan-based author of a widely acclaimed book on the hardline Islamists, said that he was also not aware of such reports.

The use of the chemical for illumination and concealment of troop movements suit the tactics of foreign forces in a hostile environment, but it would be of little use to insurgents who know the terrain and can blend into the civilian population.

"To think they (the Taliban) are employing white phosphorus as a weapon in their arsenal is very far-fetched," said Marc Garlasco, senior military analyst at Human Rights Watch and a former senior intelligence analyst at the Pentagon.

"The U.S. has optics that will allow them to see through the smoke, so it is useless for (the Taliban). They don't need to illuminate because that is telegraphing to the United States where they are going to go and fight. Plus they know the area."

"They want high explosive to shock and kill; flames raining down from the sky aren't going to frighten the U.S. forces."

NATO spokeswoman Willis said insurgents had been observed using white phosphorus weapons in the past. Asked to provide examples of the Taliban using the chemical, she wrote back to say that she was unable to do so.

The Taliban also denied that they used it. "This is not true, it is just a mere allegation," said spokesman Zabihullah Mujahid.