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Is it just CSM that can use this, not Daemons?

Also how does that thing work? Is it like every model in the unit must take a toughness test or be removed?

Did you read the rules for the item in question?

It's only CSM, so if you wanted to use it in a Chaos Daemons army you'd need an allied detachment or second CAD.

The toughness test part is a bit complicated, but remember that it has two different triggers, for two different (but similar) effects, that happen at different times (one at the Daemon's Initiative step, and the other at the end of the phase).