Javid Gilani, who heads the police in the Kashmir Province, also said that the 22-year-old officer, a Kashmiri, was killed by a rifle that was looted from a policeman in a recent attack on a court complex in Shopian. Empty cartridges of an INSAS rifle were found near his body.
In the last 10 months, terrorists have snatched more than 40 rifles from the police in south Kashmir.
"The aim behind the killing was to spread fear and terror," the officer told NDTV. He denied reports that Lt Fayaz was tortured before he was killed. "The police officers and doctors who examined the body did not see any torture marks" said Mr Gilani.
A worried centre today sent Home Secretary Rajiv Mehrishi to Srinagar. Sources say Chief Minister Mehbooba Mufti was told about concerns over rising militancy, protests and the absence of the government's writ on the ground.
The murder of Lieutenant Fayaz marks a chilling turning point.
The lieutenant was off-duty and unarmed when he was dragged out of the home of his relatives in Kulgam in south Kashmir by masked gunmen. He had gone to his family village to attend the wedding of his cousin.
He was shot multiple times. At his funeral yesterday, there was anger among locals at the killing of one of their own, in contrast to the support that has been evident for terrorists.
The army officer, fresh out of the National Defence Academy (NDA), has been described as a great soldier, a great sportsman and a much-loved mate by his comrades.