The clashes sent more people fleeing or safety, one witness told AFP by telephone from Rumangabo, 10 kilometers from Rugari.
"We can hear the sound of the bombing," he said.
The artillery fire was coming from Kibumba on a main road which runs to the regional capital Goma.
An AFP reporter on the edge of the city saw an army tank and lorry loaded with munitions heading towards the combat zone.
"Fighting continues at Rugari. We are making progress," a security source said.
During the afternoon, power was disrupted in Goma after a transmission line from a hydroelectric plant was was hit, Virunga Energies said.
Meanwhile, the World Food Program (WFP) said gunmen had attacked UN-backed school canteens in the Rutshuru area, which is under M23 control.
"Six primary schools were targeted for now and food stocks taken forcibly," a WFP statement said.
"Armed groups came with lorries and took the stocks that were at the schools in Kiwanja and Rutshuru," said the WFP coordinator for the region.
"At the moment, in Rutshuru territory, it's M23 who are active. Obviously we suspect them, because they control the two towns," in North Kivu province, he added.
The M23 has won a string of victories against the Democratic Republic of Congo's army in North Kivu province in recent weeks, dramatically increasing the territory under its control.
Mineral-rich DRC is struggling to contain dozens of armed militias including the M23 rebel group whose recent advances have revived old animosities in central Africa.
The M23 rose to prominence in 2012, briefly occupying Goma.
But after laying mostly dormant for years, it resumed fighting in 2021, claiming the DRC had failed to honour a pledge to integrate them into the army, among other grievances.
Eastern DRC has been plagued for nearly three decades by armed groups, many of them inherited from the wars that bloodied the region in the wake of the 1994 Rwandan genocide.
Angolan President Joao Lourenco was visiting Rwanda on Friday as part of diplomatic efforts to resolve the dispute with the DRC.
Kinshasa expelled Rwanda's ambassador at the end of last month, while also recalling its envoy from Kigali.
Lourenco was holding talks with Rwandan President Paul Kagame "as part of the regional efforts to normalize relations between Rwanda and DR Congo", the ruling party newspaper The New Times said.
The meeting comes on the heels of talks between the countries' two foreign ministers who agreed on Saturday to accelerate efforts to resolve the diplomatic crisis.
A roadmap for ending hostilities had been reached at an Angola-brokered summit between Kagame and his Congolese counterpart Felix Tshisekedi in July.
On Wednesday, Kenya's parliament approved the deployment of more than 900 troops to the DRC as part of a regional force established to try to restore security in the east.