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Since its a CE, I'm assuming rear drums.
Power assist(vacuum) will cause the pedal to drop when you start the car. That same assist will cause the pedal to react when something as simple as the A/C cycles. Its no big deal.
If the inspection shop has an issue, they need to put it in writing with the "measurements" as why you're failing and what "measurement" is required. They can't just say, "the pedal sank". That is what power(vacuum) assisted brakes do by making it easier to press the pedal. Dumb owners drive with a death grip on the brake pedal. Once stopped, how much pressure do you really need to keep from rolling forward?
As always, if you have drum brakes, you need to ADJUST THEM. Too much slack in the shoe to drum clearance will sink a pedal quick. Neutral-Site hit the nail on the head.
If you have any air in the lines, you need to bleed. With ABS, you either need to trigger ABS while bleeding, or bleed then test ride triggering ABS and bleeding again after test ride. Bleed your brakes.
Incorrectly adjusting E-brakes can cause preload on your drum brakes, which will increase wear on the brakes, and cause more temperature variances(pedal feels different when warm or cold out). I find that most mechanics will crank on the e-brake slack adjuster to make up for 'other brake issues', like the simple shoe:drum adjustment mentioned by Neutral-Site.
If you can't stop your car, you have a brake problem. If you can't trigger the ABS on dry pavement, you have a brake problem. If your pedal is to the floor and you begin to role forward, you have a brake problem. Everything else is bleed and adjust!