PDF Doc from Template, Error: The document does not exist or its type is not supported.

It's hard to say without seeing the template you're trying to use, but I do know that the standardly-available Appian PDF functions don't handle dynamic aka "liveCycle" PDFs.

yeah! it is like a dynamic pdf. with lot of in place validations.
Something that I can use?

I'd need to know what you're wanting to do.  In general all I can suggest is using Adobe Acrobat and creating your own new fillable PDF, without any of the dynamic/LiveCycle content.

Well I do not know if the document was created using Acrobat. as it is a gov doc. It can properly processed in acrobat and other pdf reader. 

LiveCycle documents are created using the Adobe LiveCycle editor and generally can only be opened/completed in Adobe Reader/Acrobat.  If you try opening it using an alternative viewer (such as SumatraPDF), you'll just see a message saying you need to open the document in Adobe instead.

Assuming this is correct, then you can't fill it using Appian unless (as i said above) you create a standard fillable version using the base Adobe Acrobat editor.

LiveCycle documents are created using the Adobe LiveCycle editor and generally can only be opened/completed in Adobe Reader/Acrobat.  If you try opening it using an alternative viewer (such as SumatraPDF), you'll just see a message saying you need to open the document in Adobe instead.

Assuming this is correct, then you can't fill it using Appian unless (as i said above) you create a standard fillable version using the base Adobe Acrobat editor.

Can you suggest an alternative. I am using trying out PDF tools as of now.

If you have to use the LiveCycle form, i don't believe you will be able to populate it in Appian by any available means, short of developing a plug-in that allows you to interface with the (priprietary) technology behind the LiveCycle form.  The only alternative I can suggest, which I already mentioned, is creating a new PDF with standard fillable fields.