NOTE: I am using the 1.4 Version of the Mod (this works with MM and Modular Diversity)

I created a recipe to output essentia when consuming iron ingots.
I noticed that the output slots and input slots generate essentia.

This may be the reason why its broken.
It would be nice if a fix could be made for the 1.4 Version of the mod.

Sorry to say that, but Modular Machinery, Diversity and Magic are all dead mods, with nearly all 1.12 modding. At that point you should just update to 1.16
About your issue I don't know what is going but I don't work anymore on this mod.
I know why you use 1.4 instead of latest but event if I still worked on modular magic I wouldn't downgrade it. Remember that this mod is an addon for Machinery and not diversity and as an addon it should always target the latest version of the main mod.
If you decide to update to 1.16 look at Masterful Machinery which is the same concept as MM or Custom Machinery which let you create custom single block machines.