Your seller is wrong, it is the seller, not the buyer or eBay who has to initiate the cancelation.. He has to send you a mutual cancelation request, which you will agree to. After you agree to the cancelation, you are unded no further obligation to pay for the item.
Read this link, then send it to your seller, it explains the cancelation process.
http://pages.ebay.ca/help/sell/cancel-transaction-process.html