Hi @ PBala,
Could you please share a screenshot of the configuration of your flow?
Does the Excel template that you mentioned is the attachment of the email?
Does the Excel template is exist in the sharepoint library when the flow runs and the flow would always update the Excel with the email attachment?
I have made a test on my side and don't have the issue that you mentioned, I have create a excel file in the sharepoint library as screenshot below:


I have create a flow as below:


Note:
The first value in the Condition choose the "File name with extention" dynamic content of "Get items"action.
The second value in the Condition choose the "Name" dynamic content of the trigger which stand for the attachmnet name.
The "File Content" filed of "Update file" action choose the "Content" ynamic content of the trigger which stand for the attachmnet content.
When a email arrives with an attachment names "vacation data.xlsx", the flow would run successfully as below:

The excel with name "vacation data.xlsx" in the sharepoint library would be updated as the attachment as screenshot below:

Regards,
Alice Zhang