When eBay settles a dispute in favour of the buyer, they give the seller the opportunity to send the buyer a prepaid return label. If the seller doesn't do so, eBay awards the buyer a refund and doesn't require them to return the item. Sellers sometimes become irate about this, but it's entrely their fault for not sending a return label when given the opportunity. You both agreed in the user agreement to accept these rules, and eBay's decision whether the item has to be returned.
My advice would be to let the seller know that eBay doesn't require you to return the item, but that you're happy to do so if the seller first sends you the cost of post and packing. I'd give them say a 7 day deadline to reply, after which you will dispose of the item.
