I got the best solution to this. First let me expalin the problem.
Case: The problem is Music Library not refreshing.
Cause: There may be one or few which files which are corrupted or such format is not supported by the firmware, those file(s) create such problem.
Solution:
A. I have over 500 music files in the memory card. and there was only one file which was creating the problem. So I did thourugh search like removing all music and audio files from memory and moving them back into memory card in batches of 10 and than refreshing the library. this sorting helped me to find that file. If this solution doesn't work than go for the below solution B....
1. Connect your C7 to you PC in Mass Storage Mode
2. On your PC you will need to have allowed to "Show" hidden files, do this from Explorer/Tools/ Folder Options/ View and select "Show hidden files and Folder"
3. Open your SD memory card/Removable Disk in My Computer on PC
4. Go to E:\ Private there you will see 3 folders 2000CEA3, 101ffca9 and 10281e17 .
5. Go to Private\2000CEA3\cache there you will see .dat files. Delete all the .dat file BUT NOT the Folder.
6. Now go to Private\101ffca9 there you will see another .dat file, Delete the dat file NOT the folder.
7. Finally go to Private\10281e17 There you should see 4 files 2 are Mp3 files other are Podcast files. Delete mpxv2_2.db & mpxv2_2.db-journal for Mp3 files list and Delete pcv6_1.db & pcv6_1.db-journal for Podcast files list.
8. Close all windows and disconnect your Phone. Go to Music Library and it should automatically start a refresh.
If this doesn't work than go for solution C and repeat solution B.
Solution C: take backup of all your audio files in your PC. now follow Solution B. Now move the files in your phone mass memory in batches of 10 (to allow sorting out the corrupted file/unsupported file.) disconnect your device from the PC. go to music library. first time it should start refreshing automatically and afterwards you have to do manual refresh. keep moving files in batches of 10 or 20. I'm damn sure this will help out to find out the culprit (the corrupt file) ---> This has helped me. I was facing this problem for a long one month.
Give me kudos if you found my answer helpful. 
