I had someone on Ebay return an item I sold them. I had already pulled the money from Paypal out to my bank account, and when the return was filed, Paypal tried to automatically pull the refund out without my knowledge. However, I did not have a "backup card" on file with them, so they couldn't and I ended up transferring the money from my account directly to cover the refund and elected not to put a backup card on file, which they try hard to force you into. The important part here is that they tried to pull out the money before I had received the item back in the mail.
I'm guessing that may be the scam...he says he mailed the item back to you and doesn't, meanwhile, he already gets his refund from PayPal.
Remember, that PayPal protects the buyers feverishly as they drive the business, and rule in their favor almost everytime.
Perhaps he has some method to show proof he sent it off without actually sending it, who knows but I think this is the probable scam.