But if you point out to paypal that the item has not arrived they will check the tracking.   If it shows as invalid, or not received by you then they should not refund the money.  If they do refund the money you can then go to the Ombudsman on the grounds that paypal is not following their own policies.

You do have to stand up for yourself though....paypal cannot know that the item has not arrived back unless you tell them.