Acting on a tip off, the police raided a house at Baliadanga village under Kaliachak police station and unearthed the firearms manufacturing unit.
The police first found two finished muskets hidden within haystack. Then the underground room was discovered, the police said.
The owner of the house, Gaffar Sheikh, used to run the unit from the basement from where equipment and parts of firearms were found. Around 2 kg of gunpowder was also recovered.
Sheikh, who was arrested, used to sell the arms manufactured there in Malda and its adjoining districts, police said adding workers from Munger in Bihar used to come and work there.