[hugelgupf]

It is a failure, but not of the HTTP service. It's a failure of the RPC call.

404 means "this API doesn't exist", not "the API exists but it returns an error"

[sagichmal]

404 does not mean "this API doesn't exist". It means, quote,

    The 404 (Not Found) status code indicates that the origin
    server did not find a current representation for the target 
    resource or is not willing to disclose that one exists.

Resource here is a transport-level (HTTP) representation of a business-logic concept, in most cases a document, but if your HTTP server happens to front a credit card validation service, potentially a credit card. Or a user. Or a recipe.