Haven't seen a dead-stock original to compare to but it *might* be the way the truck came originally. Take a hard look at the pipe joints and see if it looks like there are any sketchy welds or joints that aren't smoothly cut, etc. anything that doesn't look OEM.
I can vouch for my 1995 3500HD 7.4 came factory with the big pancake cat after the muffler. Surprised me. It was a manual trans truck and only had the one wire (non-heated) O2 sensor, too, instead of the three wire heated sensor you would see on light duty auto trans C/K trucks starting in 1994.
Not the best pic but the cab is to the left. Bears mentioning it passed TX emissions like it was nothing and the truck had 200K on it. Cali emissions are the strictest in the nation so it doesn't surprise me your truck barely passed. Next time you may need to make some tweaks.
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Richard