Yes, you can return engraved items. The only difference is that you cannot return them in-store. See this from Apple's return policies.
Exchange an item
If you purchased your item from Apple in the U.S., you can take it to any U.S. Apple Store for an exchange. Item exchanges are, of course, subject to in-store product availability. It's a good idea to check if a product is in stock by visiting apple.com and then seeing if it's available for pickup at a store nearby. The only exchange exceptions are personalized items (such as engraved iPhone, iPad, or AirPods) and Macs that have been custom-configured. These items cannot be exchanged in store; they can only be returned and your refund will be issued to the payment method you used on your order (per the guidelines in our Standard Return Policy).