Dang, that sucks. I didn't bother with the cylinder just because after shipping both ways(didn't have free shipping) I would have gotten like $5 back. So not worth the hassle. I ended up pulling the liners and recycled the aluminum.
I was on the selling end of something similar. I sold a NOS cr125m cylinder on ebay, for alot of money, like $350 or so iirc, and I was sure to package it VERY well, yet somehow UPS managed to break a couple fins off of the bottom of the cylinder. The seller messaged me asking for a reasonable amount due to the damage. I wanna say he wanted $100 refund, but he keeps the cylinder. (reasonable as it went from a pristine OEM piece to a broken one)
Long story short, after dealing with UPS for over a month, I finally got $100 from them that I was able to refund the guy. I'm glad he was able to hold off while I sorted it out and not a major jerk about it. After dealing with that fiasco, I almost understand why the seller of your xs cylinder was trying to wash his hands of the mess (even though that wasn't the right thing to do)
The shipping companies make you buy insurance to cover your item in the case that they don't do their job, then still fight you when they don't do their job, making you have to use the insurance... its maddening.