Craigslist transaction went south...

What really made me angry was he started with taking legal action. He could have just told the receiver is not working and I would have given his money back no question asked. 

A good lesson in why letting buyers come to your house in a bad idea. Imagine if he knew where you live?! One advisable idea with local sales is to allow the buyer to audition the component in his system, to insure it is operating to his satisfaction. After that, he is on his own.

...and then there's the idiots 'out there' that don't know how to operate audio gear that's more complex than a clock radio.  And even then, some clock radios' need the manual to make them work properly...

Case in point:  I've provided a 'shop stereo' with a receiver with a CD player, a parametric EQ, and a pair of 'line source' speaker arrays that can drown out the saws in the space.

Employ sez: "CD don't work."  Really?  OK, I'll check it out....

Later, walk up, switch on, punch ONE button on the EQ (which I've pointed out previously)....*foom* CD works....

Give the AH his $ back.  Find the manual (online?) and sell it again.  Some people can hurt themselves with a plastic butter knife and will sue the manufacturer of the knife for not providing a 'use manual'....

CYA is the order of the day. 

I gave him the original manual with remote and calibration mic. He was saying  that the receiver does not output steady
sound. I just hooked it up and no output. After a
while it has some sound output, not a little
white later there is again none and I am unable
to get anything out. I don't know what that means.

Looks like we need Judge Judy.

Actually, I think this transaction falls into the same scenario as buying a used car. Sold "as is" with no warranty, unless you told him you were providing a warranty. As long as you knew it was working properly, you can't be responsible for what he may have done, possibly causing damage.