Simaudio 600i V2 volume control.

Sounds like a bad volume encoder.  Sometimes you can carefully clean the contacts.  They use a grease in some encoders that gets crusty over time and causes your exact same problem.     I have repaired several of these type of encoders.  

It could also be a faulty optical encoder but your symptoms really suggest a bad encoder.  The fact the remote works is a good indicator 

Sorry to hear you need to return it .   Unfortunately that can happen when something is stored and not used for a long time.  Good luck with your search.  

If you really like it and they will cover the repair and shipping it's probably worth the effort.  Moon is good stuff.   

When a mechanical encoder is built there is a dielectric grease used .  That grease can get crusty and make it act exactly like OP is experiencing.   

I had a preamp and receiver that did that , I carefully opened the crimped body of the encoder , cleaned it, put it back together and problem solved.   It could be an optical encoder that's bad but I think it mechanical based on the symptoms.  

Sim Audio makes excellent gear , can happen to any company, any component.  Look forward to what the resolution is. 

That’s great news.  Enjoy.