@helix257 thanks for the video provided.
So I can confirm that gear purchased from the Helix store cannot be downgraded as it is acquired at the highest level.
You can downgrade both the quality and rarity of gear at the blacksmith. For example if you downgraded the rarity of a weapon from Mythical to Flawless then you would receive back the ingots plus any crafting materials if you had upgraded the quality of the gear previously. You are also able to downgrade the gear if you had only upgraded the quality and not the rarity and receive back those crafting materials you used.
With regards to the Ubisoft Connect rewards those should be able to be downgraded so it appears that there is an issue with those which I have reported to the development team to investigate.