MacOS Catalina causing “find: .: Operation not permitted” errors

bash does expansion of $@ different than all other environment variables to preserve white space etc in arguments. From bash(1):

@ Expands  to  the  positional  parameters,  starting from one.  When the expansion occurs
  within double quotes, each parameter expands to a  separate  word.   That  is,  "$@"  is
  equivalent  to  "$1"  "$2" ...  If the double-quoted expansion occurs within a word, the
  expansion of the first parameter is joined with the beginning part of the original word,
  and  the  expansion  of  the last parameter is joined with the last part of the original
  word.  When there are no positional parameters, "$@" and $@  expand  to  nothing  (i.e.,
  they are removed).

So you basically should be able to call rar within the Shell Script action without any parsing:

/usr/local/bin/rar a ~/archive.rar "$@"

If you're creating a Service using RunShell Script which you want to pass the selected Folder(s) to the RunShell Script and have additional actions take place in the script on them, then start with these settings.

Create the Service:

1. Open Automator and select Service or File > New > Service If Automator is already open.

2. Set Service receives selected to folders and in to Finder.

3. Add a Run Shell Script Action, setting Shell: to /bin/bash and Pass input: to
   as arguments. This changes the default code to from cat to:
   

   for f in "$@"
   do
       echo "$f"
   done
   

Now you can use $f to act on the target Folder(s), e.g. cd $f and now you're in the directory of $f and can add additional code to act upon the files/folders within $f, etc.

Update:

Use the following working code as an example:

for d in "$@"; do
    cd "$d"
    for f in *.log; do    
        rm "$f"
    done
done

Within the Test and Test copy folders there were a number of .log files and files with other extensions as well. When the above code was run it deleted only the *.log files within the target folders as show in the images below using two folders or one folder and both files and folders with/without spaces in their names.