The officials, who could not be identified despite an inquiry, allegedly tampered with the documents containing the recommendations of the expert panel to facilitate payment.
After the inquiry by Deputy Secretary Chandra Prakash failed to pinpoint the culprits, the Ministry approached police last month seeking a proper criminal investigation into the matter, officials said.
A case of cheating and forgery was registered last Thursday in connection with the irregularities, which came to light during a meeting on August 17 last year.
Some members of the expert committee brought to the notice of the Ministry that the minutes of a April meeting mentioned seven cases in the "list of recommended cases" which were already rejected.
In his complaint, Under Secretary B P Bhuker said the evaluation sheets on seven cases relating to applications for production grants under the Scheme of Financial Assistance to Professional Groups and Individuals were "replaced".
During the meeting, Bhuker claimed, the experts said that six cases from Odisha relating to production grant which was rejected by them in the meeting held on April last year have found place in the "list of recommended cases" in the minutes.
"They insisted that all the six cases were marked as 'Not Recommended' in red ink," he said. These cases related to five groups based in Naupada in Odisha and an individual from Ganjam.
In another case of an individual from Naupada, Bhuker said, experts claimed to have recommended Rs 50,000 but in the minutes, the approved amount has been shown as Rs two lakh.
All the files were examined and the experts had told the Ministry that the evaluation sheets in all these seven cases have been changed as none of these carry the signatures of the experts, he claimed.
Following this, the Ministry decided to stop payment in all the seven cases as well as remove the entire staff, except Under Secretary and Section Officers, from Performing Arts Section.
Bhuker said the inquiry conducted by the Ministry could not identity anyone who might be responsible for the fraud.
"Since, some fraud has undoubtedly taken place, need for further investigation has been felt. Accordingly, the Ministry has decided to register an FIR," he said.