Ah, ol' 110.3 (b).......mfg instructions....
Was the AHJ's opinion based on the defined 'space' in the Panasonic literature?? Did the AHJ quote/cite 110.3 (b)? Did he cite any Article?
NJ policy is an Article must be cited.
That all said; the opinions of my esteemed breathern above share a common sense approach. Just 'doing it' to get a PASS may not be the best thing, costs not being influential. Taking a 'stand' IF YOU ARE 100% sure you are within Code may be good; but make sure you are good first. MY first choice would be a basic discussion, or a 'sit down'.
Here in NJ, we have a Board of Construction Appeals as the final decision-makers in AHJ/Contractor type disagreements.
All of the above comments are my personal opinions, not to be confused with any official interpretations.
John