The 12-year-old boy, who cannot be identified, was among four other teenagers charged over the assault and death of grocer Van Viet Truong in August.
He was accused of violent disorder by being with a group using unlawful violence and causing injury, intentionally causing serious injury, affray and intentionally causing injury.
But prosecutors on Thursday told a children's court they will withdraw all of the boy's charges after they were unable to rebut the principle of doli incapax.Â
Doli incapax places a high bar for prosecutors to prove children under 14 knew the wrongfulness of their actions.
The boy's lawyer previously argued his young age meant he might not have known his actions were seriously wrong.
"The charges are withdrawn," the magistrate said.
The boy was not required to appear in court on Thursday after he was excused by the magistrate in a previous hearing.
Mr Truong, 60, died from serious head injuries after he was allegedly set upon by a group of teenagers while trying to help a fellow retailer under attack in Melbourne's west.
The group had allegedly stolen items and were chased by a worker out of a clothing shop near Mr Truong's Hong Hung grocery store.
Mr Truong was going to the worker's aid when he was allegedly set upon and dragged to the ground.
His head hit the pavement and caused a "cracking sound" as the youths allegedly repeatedly struck him.
Witnesses reported seeing the shopkeeper "changing colours and not moving" and heard "bubbling" sounds coming from his mouth.
He died days later in hospital.
One boy, 15, has been charged over Mr Truong's manslaughter.
Two girls, both 14, face lesser charges over the Sunshine incident.
Another boy, 13, previously had his charges dropped after more evidence came to light.
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