I want to do the following, read line by line of a file and use the value per line as params
FILE=\"cat test\" echo \"$FILE\" | \\ while read CMD; do echo $C
The correct version of your script is as follows;
FILE="cat test" $FILE | \ while read CMD; do echo $CMD done
However this kind of indirection --putting your command in a variable named FILE-- is unnecessary. Use one of the solutions already provided. I just wanted to point out your mistake.