The thing with cases is that they are all automated no point challenging them when opened, as no human contact is present. If you did not accept the return and issue a paid return tracked label, then the buyer escalates, eBay step in force the refund, and the buyer gets to keep the item.
You should accept, send the label, refund only when the item is back with you, then you can appeal the decision and you may have had a good case here, as the buyer is asking for something not offered, that is, working parts, and also took the item apart so it could not be returned in the same condition as received.
I'm afraid you did not follow the above process so eBay have refunded the buyer from your funds.
@goodluckagain12