Basic logic with paypal or ebay. You did not recieve the package and the shipper states it went back to the seller. He has his merchandise and you should have the dollars. Not he has the both the merchandise and your dollars.

I personally would not use ebay or paypal if my acount was not backed up by a credit card. This being not backed up with a credit card is why they fluffed you off in my opinion. On the otherhand I realise that if I used the recourse through the credit card they might cancel my account.