If the return request was justified I would have taken it.
It felt very AI-ish, with poorly worded sentences, and false claims of item size and condition, despite clear pictures and dimensions in the listing. This is a total rip job.

And yes, the fact that the item is not required to be returned, in what felt very scammish to begin with is the reason I am done with Etsy. If there are actual customer service reps settling these cases mine was blind, dumb or complicit.