You will end up getting screwed by Paypal - they will tell the buyer to return the guitar, refund his money and you're stuck with the damaged guitar. I had a situation not dissimilar a few years back when I sold a '67 SG jr which the seller said had a crack in the neck (it was clearly a scratch).
I ended up settling with Paypal in the end once they started sending in the debt collectors. Had I known what I know now, I would've told the debt collectors to get stuffed (in so many words - i.e. no contract).
It's 99% sure that the guy has bashed it himself, there is no way the damage could've happened inside the case, it's ridiculous to suggest it could have. Maybe offer a reduction in the price - thats probably gonna be your cheapest and easiest way out (even though it's gonna fu*ck with your sense of right and wrong).