I think this testimony hints at how the police found out about Smich in the early days of the Bosma investigation, I've always wondered if police got tips about him, as well as by trolling through DM's phone:
So, someone else went to police, probably after DM was arrested and the incinerator story came out in early May, and told this story about Smich in the garage.
Also, Liberatore must have known all about the incinerator because of the press coverage of the Bosma murder, but he wasn't allowed to refer to it in court. Seemed like Dungey was insinuating he and his friends made up the story of "torching" the girl (the rap song just refers to "now her ashes lay", doesn't use the active tense), because of the news coverage about Bosma , but he's not allowed to say it either.