Refer them back to the case. They required you to return the item, you did. The seller then either played dome game and held it then returned it, or it was a genuinely bad address. Unless you personally closed the case, it should still be possible for PayPal to deal with this.
Spell out exactly what happened with dates and times and so on, paying particular attention to the part where you were requested to send the item back and that you complied. If you have a receipt for the return, that would be particularly good. If the claim was left in their hands and they closed the case prior to the returned item showing up at the sellers, then it is on them. Remember, they do require a form of shipping that provides for at least delivery confirmation to go forward. So if you can provide documentation that you played by their rules, then you should have a valid position.
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