Almost. קצין doesn't translate well as 'officer' in many contexts. However, the word can be used for the police, just not in the same way as in English-speaking countries. In Hebrew, קצין משטרה (literally: police officer) means an officer (ranked lieutenant or higher) in the police. A regular policeman/woman is called שוטר/ת.
Because Duolingo is deeply conflicted about whether it is teaching correct Hebrew or colloquial Hebrew.
Hebrew requires the word האם at the beginning of a yes/no question. This is the same way that English requires reversing word order, as in "Is he an officer".
I see that you are also studying Spanish. In Spanish, you formulate the yes/no question by stating the fact and inflecting it as a question. In written form, you just surround it with question marks, so "¿Él es oficial?"
Colloquially, both Hebrew and English speakers sometimes will just state the questionable fact and inflect, as in "He's an officer?" or "?הוא קצין". But that is colloquial, not good grammar. And like I said, the makers of the Duolingo Hebrew course wanted to teach Hebrew as she is spoken, so they're not particularly consistent.
Not just military, but definitely not used in corporate environments.
Note that in the military, it applies to commissioned officers, not NCOs. Similarly, in the police, it applies to police officers ranked Lieutenant and above. Only two uses in business: the guy managing the motor pool is called a קצין רכב, and the guy in charge of physical security is called קצין ביטחון