Can connecting just neutral wire of power supply to a PCB (VDD not connected) cause sparks and burn out decoupling capacitor?
The most plausible explanation is that you have both


A faulty power supply, bench power supplies are nearly always designed to isolate the output from the mains inlet, it sounds like that isolation failed in your case.
Something connecting your circuit to mains earth, possiblly a data connection, possiblly an osciloscope, possiblly just part of the circuit touching an object that is connected to mains earth.