Can i use MUR160 in the place of MUR120 diode?. will there be any problem?

 

Did you look at the datasheet?
The only difference between the two is the Vr.
MUR120 Vr=200V. MUR160 Vr=600V.

 

If u see the datasheet max instantaneous fwd voltage is different, max instantaneous reverse current is different, max reverse recovery time is different, max fwd recovery time is different. if u observe the graphs also Vr Vs C also differs etc....

 

If i replace MUR120 with MUR160 diode is burning at 55DegC? why this is so?

 

Why don't you go back to the MUR120?

Either that, or find out what else changed in the circuit.