Proper spot and down?

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Offense has the ball, 3rd and goal on the 4 yard line. Shotgun snap goes over QB's head. Halfback fall on the ball at the 14 yard line. Head Linesman blows the play dead, assuming HB has recovered the ball. The ball squirts loose and the defense recovers. After the officials meet, they confirm the whistle had blown the play dead at the 14. A coach from the defensive team runs out on the field, berates the officials, and receives an unsportsmanlike conduct penalty. The ball is placed at approximately the 3 yard line and third down is repeated.

Is that the correct placement of the ball and should it still be third down?