I shipped it to him in a carefully packed box with adequate protection wrapped around the cue. He sent it back in a cheap $10 cue case. On closer inspection I can see that the cue could easily move around inside the case and there are two exposed hinges where the damage occured. I did tell him that he was responsible for shipping but he remained silent on that subject. I do not know if he took out insurance or not. It came back in a Priority Mail triangle box.
Those scratches go around the cue in a relatively thin ring of scratches in two different places. My first thought when I saw that was "that cue was being rotated in place about its axis while it was being banged against something. One possible explanation could be that a person was rotating the cue as they banged it against the edge of a table, and they did that in two different places".
Two things make me question whether the damage could have occurred during the return shipping back to you though. The first is that those rings of scratches do not look like they line up with hinges. The ring of scratches on the forearm is a small distance
below the hinge, but the ring of scratches on the butt sleeve is a small distance
above the hinge. Even if you were able to shift the cue up or down, which it doesn't look like there is room enough to do, you would never be able to get both those rings of scratches to line up with both hinges at the same time so I'm not seeing how the hinges could be the cause.
The second is that the scratches were his whole reason for returning the cue to you so he is admitting that they were there prior to his returning the cue. He also filed the claim with paypal based on the scratches, again, prior to shipping the cue back to you. His knowledge of the scratches prior to shipping the cue back seems to be proof that they were there prior to his shipping the cue back.
If the cue was in pristine condition when you sent it to him, and you had packaged it well, and I have no reason to doubt either, then at this moment it seems most likely that the damage occurred while the cue was in his possession and not during shipping in either direction.