Jim is correct that Law 45C4(b) does not apply here.
Neither does Law 45C2.
Law 48A says:
A. Declarer Exposes a Card
Declarer is not subject to penalty for exposing a card, and no card of declarer's or dummy's hand ever becomes a penalty card. Declarer is not required to play any card dropped accidentally.
TD ruled correctly, but it would have been better had TD read the applicable law at the table.