I was thinking along the same lines as Kellhy S.
Does he do this sort of thing (or rather, NOT do anything to speak up for himself) at home, as well? Or is this only at school?
My kids are super kids. Truly they are. Yet, both of them (the younger one WAY more than the older one though) would NOT speak up to the teacher. Why? Because they were taught at a very early age to respect elders and authority and not "talk back". At home, it is pretty clear what talking back is. At school, the line is a bit more blurry, and it took some discussions and finesse to get through it.
For example: My daughter who had been potty trained since her 2nd birthday, including at night... when she was in K-5, (at a private school with a SUPER wonderful sweet teacher who ADORED her) they would have reading groups. A few students would gather with the teacher in a corner of the room and sit in chairs in a circle and read, while the other students worked on something at their desks/tables. There were maybe 5 kids in the circle taking turns reading and the rule was that when someone else was reading (i.e., it wasn't your turn) you didn't talk. Well, my daughter wet her pants. Why? Because she didn't want to raise her hand and ask to be excused to go to the bathroom (right there 7 steps away from the reading group). It "wasn't her turn" and "you aren't supposed to talk when someone is reading".
Kids at that age have a difficult time figuring out when it is okay to speak up and when it is considering breaking a rule or perhaps backtalking. In the instance of the papertowel, it sounds like he didn't speak up because he KNEW he had broken a rule. He did break a rule, but he didn't realize that there can be exceptions and that his qualified. To have said something, in his little mind, would have amounted to "arguing" with the teacher.
When you are at home, does he ever object to something you have told him? With a reason? For example: You: "Billy, go tell Daddy to come here." Billy: "I can't, Mom. Dad is at the neighbor's down the street, and you said never to go down the block alone." or "I can't. The Joneses have their big dog that bites out in the yard and it's not on a leash."
I agree that you need to practice with him some and role play, and work with him on discerning when it is ok to speak up and when it is not. Sometimes, there isn't a cut and dried answer--even for adults! And by all means, talk to him and ask him questions about WHY he didn't speak up. You can't help him understand if you don't understand his logic.
Good luck.