The Ministry of Justice has been accused of “shamefull callousness” in its refusal to compensate Sam Hallam, the miscarriage of justice victim who spent more than seven years in jail for a murder he did not commit.

Mr Hallam was 17 when he was convicted of the murder of Essayas Kassahun, who died after being attacked by a gang of youths in October 2004.

But in May 2012 – seven years and seven months into his sentence – appeal judges decided the conviction was “unsafe”.

They ruled new evidence, in the form of timed and dated mobile phone photographs, dramatically undermined accusations that Mr Hallam had deliberately concocted a false alibi.

But the Ministry of Justice (MoJ) rejected his application for compensation for miscarriage of justice last August – a few months after guidelines on such cases were changed.

The Justice Secretary ruled Mr Hallam’s case did not satisfy a new narrower criteria for which spplicants for compensation must now show “a new or newly discovered fact shows beyond reasonable doubt” that they did not commit the offences for which they were jailed.

In a landmark case fought alongside a man whose conviction of attempted rape was also found “unsafe”, two judges were asked to rule that UK law is incompatible with the European Convention on Human Rights (ECHR) because it wrongly restricts compensation in miscarriage of justice cases.

The judicial review challenges were the first to be brought against the government’s decision last year to narrow eligibility for an award.

Paul May, chairman of the Sam Hallam Defence Campaign, said: “This is a sad day for justice and the presumption of innocence. The callous refusal of the Ministry of Justice to compensate this innocent man is truly shameful.”

“We hope the Court of Appeal will overturn this judgment. Sam Hallam’s wrongful conviction was examined in meticulous detail by the Criminal Case Review Commission in a three-year inquiry, and Thames Valley Police in a 15-month investigation.

“Not a shred of evidence was uncovered to place him at the murder scene, while no less than 37 witnesses were identified at the scene, none of whom saw Sam Hallam.”

Lord Justice Burnett said the statutory compensation scheme “maintains the presumption of innocence, which is not impugned, but provides compensation if the Secretary of State is satisfied that the new fact conclusively proves innocence.

“The refusal of compensation on the basis the statutory criteria are not established does not carry with it the implication that the person concerned is, in fact, guilty.”