In the original "The Wonderful Wizard of Oz" book by L. Frank Baum and the 1939 film adaptation, the Wicked Witch of the East's house falls on her, killing her. This event frees the Munchkins from her tyranny.
In "The Wiz," the Wicked Witch of the East is depicted as a glamorous and flamboyant woman named Evillene. She is killed by Dorothy's house falling on her, just like in the original story.
The film does not introduce any concept of the Witch turning the Munchkins into anything. The Munchkins are simply freed from her rule by her demise.