Going back to the OP's question, the practices current in civilian ATC with regard to transponders are a red herring. What is being asked is if it is conceivable that the military radar operated by the RMAF missed the contact.
Obviously it is conceivable - they were asleep, they were u/s, they were shut down for a day's holiday - who knows? The fact remains that a military radar does not rely on IFF - an incoming aggressor is not going to conveniently squawk for you. An effective military radar should not only have picked this aircraft up as a possible threat, but should certainly have launched aircraft to intercept and identify. Otherwise what's the point of having a massively expensive air defence system?