Well, it is always possible. Manufacturing errors do happen.
Or, if you are suspicious, like me, the buyer may just be saying this to see if they can get a partial or full refund.
So, you have a choice.
1) Apologise profusely and ask the buyer to return the item (they have to pay the shipping cost to do so). And you refund their purchase price. You then get the item back and resell it - noting that it is open and parts missing, of course.
If the buyer objects and wants to open a dispute, Paypal will expect them to return the item first (again, at their expense).
If they are trying to pull a fast one, the buyer will likely decide not to bother. They may unfairly give you neg feedback anyway.
2) Or, if you don't want the item back and/or trust the buyer is not trying to scam, you offer them a partial refund - hopefully this will end the issue.
Hope this helps!