Deputy Inspector General (Ferozepur Range) Hardial Singh Mann, in an official release, said the murder was the handiwork of some gangsters.
Earlier, the family had refused to cremate the body unless the accused were arrested, but then agreed to conduct the last rites after an assurance was given by the Tarn Taran district administration.
Sandhu's wife Jagdish Kaur was adamant that the family will not perform the last rites until the culprits were arrested and also accused the government of withdrawing his security cover.
Family refuses to conduct last rites of Shaurya Chakra awardee Balwinder Singh Sandhu until his killers are arrested
Balwinder Singh Sandhu fought against terrorism, facing scores of terror attacks during the height of Khalistani militancy.
Sandhu had fought against terrorism in the state for years, facing at least 16 terror attacks during the height of Khalistani militancy.
The 35-year-old assistant commandant (AC), who joined the Central Reserve Police Force in 2013, has been decorated with the "6th bar to Police Medal for Gallantry" on the eve of the Independence Day.
As the three men of the fire wing of the force went looking for the source of gas leakage, a blast took place leading to their death, officials said.
Those from the Army who have been awarded the Shaurya Chakra are Lt. Col. Krishan Singh Rawat from the elite Special Forces, Major Anil Urs and Havildar Alok Kumar Dubey.