Told I Still Owe On A Lost Package

I purchased a $600 product from Williams Sonoma end of October. UPS delivers it a week later to a wrong address somewhere in my neighborhood and the picture only shows the box and part of the porch. Problem is I live in a cookie cutter neighborhood where everything looks the same. I file a claim with UPS, less than 24 hrs later they reply with too bad, there is a picture and the gps says they were in your area. Ok, I file a claim with Williams Sonoma. Less than 24 hrs they say too bad we agree with UPS. So I file a claim with paypal for buyer protection. Takes 30 days and case was finally closed out after what seemed to be an actual investigation.

Within 20 mins I receive an email saying “we received notification that a charge in the amount of $595.00 was reported as unrecognized/fraudulent. This charge was processed for one of the item(s) that was included on your recent Order XX-XXXX. Please contact us at (866) 477-3113 at your earliest convenience so we may assist with processing your payment. We are open 7-days a week 8:00 am – 5:00 pm PST. Please note that we are unable to process any additional orders or shipments to you until this outstanding payment is resolved.”

I call today and explain it wasn’t fraudulent. It was an investigation because I never received the package. Further explain all the steps I took. The lady explains to me we see it here that we lost the despute, its treated as a charge back and we have to get our money from either you or UPS and they say it was good delivery so we need to get the money from you. I explain i’m not paying because I never received the item. It wasn’t like a $20 rolling pin that I could just eat. It’s $600 that I had been saving for this 5 piece knife set. She explains that until it is paid, I am no longer allowed to purchase from Williams Sonoma.

First, is this legal to try and strong arm me into paying for this? Second, what kind of repercussions can come of this other than not being able to shop here? Like will this affect my credit or just be an in house on file thing. Wife is also worried this means she can’t buy from here either.