FYI - I mistitled this post. It's the front output seal not the rear.
Hey all, I recently replaced the front output seal and flange on my transfer case and still had a leak a few days later. Although this time I noticed metal flakes in the gear oil.

After taking it apart again I saw that the black mud shield of the flange wasn’t sitting evenly within the transfer case and cut into the inner wall that it presses up against. I believe the oil seal sits behind this groove and should still seal properly.

I assume I shouldn’t use the same flange as it looks like the black part is no longer straight. Any recommendations on what to do about the groove on the inner wall?

I’m guessing this is a result of the seal not going in completely squarely?

here’s a link to some higher res images
https://imgur.com/a/ZFLl53x