I have seen delays as long as 45 or so days, within the same province. It is possible they will still arrive. The reason I know it has taken this long, is because I have had buyers reach out to me when their previously lost item arrived.
As you seem to already know, you should refund the INR before the deadline to avoid a defect. The buyer can be instructed to reach out to you if/when they arrive so that they can pay back the refund. It is not against eBay TOS to exchange Paypal/contact info with the buyer for these purposes.
If this is a regular customer, who you have sent untracked similar priced items to before, I would say it is very unlikely that they are acting in bad faith. Not that it matters, because when you send untracked your only recourse is to block the buyer to prevent future theft. You can't get your item or money back.
It is also possible that it was delivered to the wrong house on his block. Letters do sometimes get incorrectly sorted at the street level. Anyone who lives in a house has received a letter meant for one of their neighbours. If someone received it, they might have decided to keep it, or they might have returned it to Canada Post. If they dropped it back off at Canada Post and it gets returned to you, it can sometimes take 2-4 weeks from when it was returned to sender.
In short, while very rare, 40+ days is possible for delayed lettermail.
