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How to handle a return request

Ok this should be an easy one but I have never handled a return before

 

I sold an item and shipped it via USPS (as selected by the buyer) within the allowed handling time. USPS was very delayed and the buyer purchased this item elsewhere and is now requesting a refund. The ad says I don’t accept returns but the item is covered by eBay’s Money Back Guarantee. When I tried to issue a refund, the eBay app required me to input a payment method and said I owed money. I have not yet received the original payment from the sale. I dont want to pay if I dont have to - I did everything I was supposed to do. Please help with guidance 

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