Hello,
It seems that the refinery want to upgrade from legendary quality.
As of writing this, the bug seems to manifest only when upgrading cryogenic plants (see attached image).
https://drive.google.com/file/d/1tt62J4xRdMTROnyBEm6Xp42FSaClEt3_/view?usp=sharing

Hi, sorry but this is intended behavior. Recipes can be crafted at any quality. You can put legendary cryogenic plant into recycler with quality modules, you'll just always get legendary ingredients back. Same goes with refining any legendary item.

Use filter on inserters to prevent them from doing that. It might be a nice quality-of-life feature to do this automatically... I'll make it a thing after I get done with another mod I'm working on