This is a common problem I am running into with screens. If the screen you took off is working, check the proximity on that one. If it works then you know that proximity sensor is working. Do this first with every IPhone 7? I am after going through 3 screens to get one that worked. Now you know that sensor is good, so if you have an issue with the proximity sensor going forward you know it is the screen. As Amber said it is usually the screens, not the sensor.
One problem with this business is the refurbished screens are not very good. I would love to buy the higher quality screens but then I am not competitive. So I get the generic but they cause me more labor. Not good. I am thinking of switching vendors but the one I use can get me parts delivered next day and has great prices. Oh will we shall see.