@ lucky
If you use the item on the credit memo/refund, then that item will be returned to stock as if it were new
accepting a return 3 years later, I doubt it is in new condition and ready for sale
I would create a non inventory item called return-noitem, set the expense account on the item screen to a discount account (it should be a sales discount income account, but if you already have a discount expense account use that)
On the customer credit, use that item enter the amount as a positive
