Unless I'm missing something from the photo, I'd probably think this was a bit naff, I might go so far as to make sure the CSD/CSM recorded it, but I don't think in my wildest dreams I'd expect any airline to take the seat out of service. I also couldn't possibly say how long ago it happened - to me, the lack of flaking around the torn section, and the cleanliness of the fabric underneath, actually suggests it probably wasn't that long ago though.
I'm looking at a small tear in the upholstery and a bit of superficial scratching on the plastic fascia. I'm willing to bet repairing that upholstery is probably not at all straightforward, and the seat needs to taken apart to do it. You're not talking about a quick 30 minutes in the hanger at LHR, that's for sure - it's possibly even a job for CWL.
Given the potential choice between a passenger being downgraded from F to CW if the cabin's full, or using the seat as-is until it goes for scheduled maintenance, I would personally think the right decision for the customer is to keep them in F. YMMV.