Confusion regarding Biased Clipper Circuit
But the thing that confuses me is that i learnt that Short makes
  potential Difference zero so when the diode was conductiong its act as
  short instead of clipped voltage which is appearing at output it must
  be zero voltage, right ?




What you are saying is entirely correct : when the diode conducts it acts as a short (ideal diode) and  has zero volts across it terminals. However, the non-ideal diode do have some voltage drop , which is 0.7 in your example. So, apply KVL to the loop, when the diode is conducting : the output voltage = Vb + Vdiode = Vb + 0.7