What is the purpose of military using words such as "collateral damage" to mislead or decieve the public?

Actually, you've made up your mind wrongly and in advance, so it's basically a silly question. Professional jargon is hardly limited to the military, either. Terms like "collateral damage" aren't euphemisms and were not developed to mislead the public. They have specific meanings for professional use among the military, as in their professional publications. These terms of course get used by non-professionals, often inappropriately, and the military tend to use jargon when it might be better to speak plain English (just as your doctor probably uses more medical jargon than you'd care for). But that's all quite beside the point. Jargon has its uses, since a phrase like "collateral damage" can be used when the substitute would take not two words but an entire paragraph.