As a side note, I wonder how it ever got to be okay to damage someone's property??? If the manufacturer, model and serial number is enough for the ATF to track it from manufacture through retail purchase, it should be plenty for ANY investigating agency.
Its been done that way for a long time. Perry Mason's LT Tragg (or was it Trask?) was often asked on the stand to ID a gun, and always pointed out how it "had his mark" on it.
The reason has been well explained by other posts. Not every police dept does it, but most do. Electric engraving pencils have just made it easy for them to mark the guns in what we consider defacing ways.
I'd like to point out, that, while we always think of it as our property, that they are holding, they don't see it that way. It is evidence. ITs not our property when its evidence. We have a legal claim after it is no longer evidence, but its not ours until we get it back.
Other items are not treated the same was as firearms, when it comes to their return. Books, art, electronics, cars, etc, they have no issues with returning them after they are no longer evidence. Many individual officers (including officers of the court, not just uniformed officers) tend strongly to disapproving of returning firearms, and in some places it is even policy not to. This is, of course, because you "let" them get stolen in the first place, and might do so again. They don't want them getting back on the street. Your concerns about your property (and its condition) are low on their priority lists.
There are some depts. and officers that do things the way they ought to be done, but sadly, I think they are in the minority.