If the EPUB passes validation, then it's a Smashwords issue, and I'd contact Smashwords technical support.
HI Steve, thanks for your reply.
I have emailed the same query to smashwords and received the following reply,
"EPUBs include an NCX, which is a navigational panel like a Table of Contents. Our retailers need at least two items in that list. You'll need to add those manually using the program you used previously in order to continue. This isn't an issue that the validator would pick up. If you prefer, you can upload a .doc instead, so our system can auto-create the NCX."
So how do I add list manually to NCX or whats so ever? I am so confused
That is not something InDesign can do. I requires an editing application for text, or an EPUB editor, and some knowledge of how to open EPUB files and editing them.
There may be some people here who can tell you what to do. I case they don't, here is a reference which may help. It's a little out of date, but I believe it covers what you need:
You can also learn more about creating EPUBs from InDesign by going to www.Lynda.com and watching videos on creating EPUB from InDesign by Anne-Marie Concepcion. You can watch videos for a week before paying for a monthly subscription.
I've sent many reflowable EPUBs through Smashwords. InDesign will write the NCX file for a reflowable EPUB (unless that's suddenly changed). You do have to include a TOC style with the anchors turned on. The TOC itself doesn't have to be generated on a page. When you create the TOC style and indicate which styles are to be included in the TOC (the chapter number/title style for example). Just make sure that "Make anchor in source paragraph" is checked. That should do the trick At least it works for me.
I have a quick solution on this issue. But I some of the major design like style font of chapters will be replace. fix via epub.