conditional suppression just hides a section when your formula evaluates to true it does not hide all section with in a group nor does it make the grouping not exist.
You need to make a formula field that changes the value in itself based on the param you pass in and then group on that formula field
example:
//formula called conditonalGrouping
if param = 'Y' then table.machinetypefield else 'No Grouping'
Group1 use @conditonalGrouping instead of table.machinetypefield
Keep your conditional suppression on GH1 the same.