That's not a piston. That's the stancion tube. It doesn't move. You're going to have to figure out if that gouge has penetrated into the inner wall and bulged it on the inside. If so, the slider part of the fork will be impeded and that is dangerous.
In order to check it, you should pull the spring out and slide the fork to full compression and see if there is any interference. I'm betting there is. And that would render the fork unusable from my standpoint.
In order to check it, you should pull the spring out and slide the fork to full compression and see if there is any interference. I'm betting there is. And that would render the fork unusable from my standpoint.