You are starting to not make any sense. You said you received the package back but it had a can of paint or something in the box. Then you said you lost the AZ claim because you didn’t have the package back and wanted to make sure what was in it before you refunded?
So what seems to make sense is that the customer asked to return the item. You probably for some reason said no. Then the customer opened an AZ claim because you refused to offer the customer a return for their product. But you didn’t defend against the AZ claim because you were waiting for the product to come back to you. Then you did receive the product back but it wasn’t the correct product. And now it is too late to defend the claim.
Is that about correct?
If so, then you are out your product, will likely be suspended soon, and deserve every bit of it. You made so many mistakes in this transaction it is not funny and sellers like you only hurt the rest of us that are trying to operate legitimate businesses.
A customer can return an item within the return period for any reason. If you deny that then you deserve to lose the impending AZ claim.
Once the claim was filed the customer does not have an obligation to send the item back until you represent your side and Amazon requires them to send the item back.
You see, this is what happens when you try to avoid telling the truth and taking responsibility for your actions because you don’t want to make yourself look bad. If you had said in the beginning that you refused a return and the customer opened an AZ claim you would have gotten much different advice that possibly could have saved you from losing the money and the item. But your pride, ego, or whatever it is that prevented you from coming forward with what really happened has ultimately cost you a lot of money. I guess you can at least be thankful that the item was a gift and did not cost you anything so you are not actually out of pocket much money just lost the goods with no compensation.
Maybe you should reconsider your morals and ethics and try to make wiser decisions in the future. Lying or avoiding the truth almost always ends badly.