That's because you are including blank ranges in the formula. Also, you should adjust reference range (since you don't have header row(s) in your workbook).
Adjusted formula is going to be...
=AND($C1<>0,$C1<>"",$C1<SMALL(IF(($C$1:$C$625<>0)*($C$1:$C$625<>""),$C$1:$C$625,""),3))
FYI - You don't need to confirm as array in CF, all formulas are treated as array formula naturally in CF.