Did you find something in Riot's store allowing you to break the ToS? No, because such a service is not offered. Regardless of how much money you spend, you are required to follow the same rules as everyone else. If the IFS determines that you've been validly reported in violation of those rules, you'll be punished according to those rules. If you wanted to avoid a punishment, you should've followed the rules.
If you misbehave but a teammate or opponent does or says something even worse, you should definitely report them after the match, just as someone reported you for your own misbehavior. Yes, that's certainly possible. Reports are not a limited resource. Any time someone believes that another player violated LoL's behavioral standards, they can report that player. Punishments are similarly not limited: if more than one player in a game merits a punishment, they can both get a punishment. This can happen even if the players in question were antagonizing each other. The IFS doesn't need to weigh the severity of all reported players' actions and then "award" the "winner" with a punishment; it's not a contest.
Think of it like dealing with a noisy person in a library: ask them to keep it down, and then notify library staff and move to another area if that doesn't work. If you get into a shouting match with them, you're just as likely to be removed, even if you weren't shouting quite as loudly as they were. The goal is a quiet library.
You are certainly allowed to defend yourself from toxic chat, which is accomplished by muting. This is a 100% effective method. Flaming back is a 0% effective method that also constitutes unacceptable behavior and thus opens you up to reports and punishments. Read about this in more detail here.
Your permanent ban was permanent, and it wasn't given in error, so it won't be lifted. It sounds like you still think your toxic behavior was the right thing to do, so lifting your permaban would be a very poor choice.