I don't think the inspector is interpreting the code properly. 620.21 refers to wiring in hoistways, on cars, within machine rooms and on the counterweight.
620.11(C) says all conductors in raceways shall have flame-retardant insulation.....Shielded conductors shall be permitted....applied to any conductor within the cable or raceway system.
NM is a cable.
I think this section is not really refering to the equipment supply conductors but then again it doesn't say it's not either.
