I'm just a simple Joe Public nowadays, but as far as my past knowledge and experience indicates, a retailer in the UK bears the primary responsibility under law for the merchantable quality of the goods they sell. Therefore if an item fails or develops a fault the first port of call should indeed be the retailer. this is irrespective of whether the item(s) concerned are covered by a manufacturer's warranty or not. However, unless the retailer warranted otherwise, at the point of sale, they will simply return the goods to the manufacturer, or their agent for repair or replacement. Therefore, when the goods are covered by published manufacturer's warranty terms, and under those terms they do not require that the goods be returned to the retailer (as with cars for example), it is usually more convenient and efficient for all parties that the buyer returns direct to the manufacturer.
"Distance selling" legislation places a greater responsibilities on the seller, who again should be the first port of call, but their responsibility may be difficult to enforce in the case of an Ebay Shop. I assume the goods were not faulty on receipt? If they were, and the supplier refuses a return for credit, then PayPal/Ebay should, and I believe will, enforce the customer's claim.
As most of use will know, many manufacturers have a slick returns procedure which ensures that they receive all necessary details of the item concerned, the defect and the claimant after which a returns authority is granted. Even for a minor defect where it might seem simpler just to put a small part in the post, major manufacturers will normally require the return of the whole unit. Some manufacturers have a procedure for covering the costs of carriage. In all cases that I know of, unless the item(s) concerned are traceable by serial number, the manufacturer will require at least a copy of the original purchase receipt. A PayPal receipt may or may not satisfy that reasonable requirement. The seller may have been a private individual or a "retailer" selling surplus, bankrupt, insurance write-off or demonstration stock where the age of the item may pre-date the sale date by some considerable margin and/or the item may have suffered pre-sale mishandling, prior usage, flood or fire damage etc. Therefore it is reasonable for a manufacturer to hesitate over accepting a PayPal receipt if the goods are from an unknown supplier. It may then simply become a matter of a goodwill decision which again is unlikely to be made until the goods are returned to them.
Sometimes, as we are told so often, it is indeed perhaps better to pay a bit more and buy from an authorised and/or recognized source which many Ebay suppliers definitely are not!
