I wouldn't recommend replying or bouncing.
Just don't accept mail for addresses that aren't active.
But you should have your server reject the messages (without bouncing) using status codes. At minimum, this avoids having to store the mail and then download it. At best, some of the spam mailer packages will then remove the address from the list.
Your SMTP server does not HAVE to send bounce messages! The specification requires this ONLY if the server has replied with a 250 status code, indicating that it has accepted the mail. If the server accepts the mail, then the specification requires a bounce message if it is undeliverable. However, the server could also reply with some error code, and then is not required to send a bounce message.
(Note, however, that any SMTP server up the line that has relayed the message to your server, would then send a bounce message.)
Why repeatedly try to deliver mail that isn't being accepted? Some of the mailer packages are smart enough to do this. It's in their own interest.