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Buyer returning functioning item as defective because he changed his mind

I'm pretty sure I know the answer to my question, but I'll ask it and perhaps someone will have some good advice for me. I sold a graphics card to an individual. He sent me a message after he had already paid and I had just mailed the package that he wanted to cancel the order because he didn't need it. I told him it had already shipped. Not surprisingly, he wants to return it because he says it's defective. I know for a fact it works perfectly and I tested it prior to shipping it.

 

But I'm stuck, I have to take the return and issue a refund, correct?

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