Firstly, please do not initiate a refund unit the unit has returned back to you. Also as you have mentioned, you can charge a restocking fee for the order after the unit has returned to you and depending on the disposition of the unit.
As this is a Merchant Fulfilled Order, the choice of whether you want to issue this buyer a refund or not is totally at your discretion. As this order was duly shipped out in the month of August, the buyer should have ideally contacted you with in few days after the estimated delivery date.
Also, please know that we do not restrict our seller's from issuing a partial refund or denying a refund. However, please ensure that any decision that you take is communicated to the buyer. This will ensure that the buyer is fully aware of the decisions that you take and the reason behind it.
In case the buyer doesn't reply back to you, please contact the customer service department of Amazon.com so that they will contact the buyer regarding this.
Customers can contact Amazon.com Customer Service through the Contact Us link found on any Amazon.com Help page:
http://www.amazon.com/contact-us/