Buyer broke paypal rules, still wins case
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What specific PayPal rules or polices were broken?
What was the specific dispute? How did you respond to the PayPal dispute?
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There are risks to online selling. There are risks when you don't have your own legal counsel to enforce your own policies.
When using PayPal you accept PayPal policies; those are what count. There are no separate PayPal "rules" for people to follow.
As a seller business you cannot stop a buyer from returning an item; neither can PayPal.
Anything returned separtely from instructions by PayPal becomes a buyer-seller issue only.
This is complicated by a buyer dispute of not as described. PayPal does not oversee packaging or unpackaging so PayPal makes a best guess about which party is telling the truth. When PayPal decides in favor of buyer, the buyer needs to return item for a refund. (Buyer did that in advance.) When you dispute the product returned not being the same, again it is your word and PayPal reviews all information to determine how truthful it is.
That's the way iit works. If you want to be in more control, don't use PayPal for payment service.
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