The racket was unearthed when a team led by Superintendent of Police M R Sibi Chakravarthy, acting on a tip-off, raided a house in the town.
Police arrested 37-year old Kumar and his three relatives, including Saraswathi (40), and seized a machine used for making the fake liquor, 50 cans of spirit, fake labels and stickers of famous IMFL brands.
They also impounded a car, an autorickshaw and three two-whellers, police said.