It's crap, but according to ebay and paypal policies, if a seller offers a refund period they only have to refund you the cost of the item, not the cost to ship the item. Sometimes shipping fees include stuff like storage, which is bullshit.
This is why you should always pay for things on ebay using a credit card and save your paypal money for FS/FT. With a credit card you'll get your shipping fee back. You'll have to pay for shipping the defective item back to them though, but if it's defective you can use the cheapest method of shipping possible (with delivery confirmation) and still get your money back.