Returned Item which was Damaged on Receipt - Seller Reporting me to UK Police?

Hi all. I'm hoping you can help.

tldr: seller has accused me of breaking the product they sent me and will report me to police as i looked for a refund for item that arrived that way..!

Last September I bought a pair of earphones from a UK website which has a very high trustpilot score. I won't name the site for obvious reasons. It's not a big player like Amazon but after some research it has about a £100k turnover but works out of their home (from what I've learned).

When I received them they worked perfectly. I minded them as they weren't cheap but by Christmas morning problem developed in the left ear bud. It began cutting in and out and it became frustrating.

I contacted the website and they asked if they could have them sent back for testing. They got them and sent me a repair set. I then noticed the new set wouldn't work at all so I sent them back again however this time looking for a refund.

They told me that I damaged the second set of earphones and they will, as a gesture of goodwill, send me another pair. Being that I enjoy my music I couldn't wait another 2+ weeks for another replacement so I bought another pair and instead kindly asked for a refund.

After they told me no I then escalated the matter to Pay Pal who are currently looking into it. In the meantime they've contacted me to tell me that although I'll 'probably win' my 'case with PayPal' that they've reported me to Action Fraud in the UK as I'm trying to defraud them the cost of the earphones.

Now - firstly I know I'm in a different country but that isn't the point. I'm bothered because a) I thought this is a consumer matter, not a criminal one. I don't know how they could assert that I defrauded them. b) I'm worried my good name could be tarnished by this carry on.

Will the UK police be bothered by something like this? I didn't damage anything and if anything I'm thinking this is a seller who's taking out their grief on me as I used PayPal's protection to recover my losses. But can he take this further?

I presume Paypal will rule in my favour because this item arrived the way it did in its box!

Thanks for reading and sorry about this.