If an item is returned to sender, eBay require a valid reason as it counts as refused delivery and therefore not eligible for protection under the MBG, except for a couple of exceptions. The only valid reasons are the package was obviously damaged / empty, or there was underpaid postage, and they will only accept proof from Australia Post that confims either of those.
The seller should not lose an appeal in this case, especially since if they did, ebay would force a full refund, which is not appropriate in a case like this (assuming postage was a separate charge, the seller shoulld not bear responsibility or loss for that).
Though, if the seller has been unresponsive to messages, I can understand why the dispute was opened and that does put a slightly different spin on the situation, but I'd need a little more info about the type of messages being sent and how long between sending the first inquiry and opening the case before being able to comment much further or advise on that. (Personally, I would have offered to pay postage costs to have it re-sent, but this requires the seller to respond and assist).
