The most logical is to give him his refund when he gives you back the jacket, assuming you are planning on selling items here in the future. Asking him for measurement pics, going back and forth about who is right/wrong, continuing with this thread etc is being penny wise but pound foolish. Anyway, its your jacket/sale, do as you wish.
since when did sellers start having return policies though? this all seems rather silly. i know its important to maintain a good selling reputation but really?