The alcohol was smuggled in from a neighbouring country and then packaged at the factory, the Saudi Gazette said.
"Inspectors from the department foiled attempts to mix liquor with Dettol to change its colour and con customers into thinking it was foreign liquor," said Spokesman of Anti-Drug Department in the Eastern Province, Col Salman Al-Nashwan.
The Indian nationals, however, were not identified.
Large numbers of Dettol bottles were seized from the distillery, the report said.
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There were also another 10 empty tanks for stocking and equipment for packaging. The inspectors also seized 204,000 Saudi riyals in cash from the house of the Indian national who ran the distillery.
Al-Nashwan said his team maintained round the clock surveillance on a warehouse after receiving a tip-off and when one of the suspects arrived at the scene, the officers detained him.
He confessed to transporting liquor in cans from a neighbouring country prior to packaging and selling it as foreign liquor.