Did the buyer open a dispute, or are you doing it outside that program?

My preferred method is to cancel the transaction - eBay then sends a request to the buyer to cancel. I think - but I am not 100% sure - that a canceled transaction precludes feedback.

If a dispute has been opened, you want to take your steps through the dispute program to make sure you are credited with resolving the problem. Too many unresolved problems can lead to punishment from eBay.