Is anyone allowed to refuse water if it is offered to them?

There is no objection to returning water or anything else that a Muslim does not need, except for what has been reported regarding the prohibition of returning basil (rayhan) and the disliking of returning any perfume (ṭīb). It is preferable to accept kindness and gifts, especially when in need or to honor the giver. Indeed, "the Messenger of Allah (peace and blessings be upon him) used to accept gifts and reward for them." It is better for one who accepts a gift to reciprocate for it, as the Prophet (peace and blessings be upon him) said: "Whoever does you a favor, then reciprocate it."