If the dispute raised to paypal.There would be an option for you:
You would like to refund buyer's money,but buyer must return the item back first with the same contion you sent him.
And then paypal will ask buyer provide confirmation to show that the item is being returned back.Paypal won't just refund your money back if you take the propty action.
Btw,this happened to me just few days ago.No item back,no money refund.
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