He was technically right, the welder had a 120 fan in it, it was wired from one leg of the 120 to ground. What I did was not right, I installed a 4 prong receptacle, then installed a 4 prong plug on the welder, but didn't hook up the neutral. So, the ground was still carrying some 120v current when I was finished. The welder outlet was about 3 feet from the power panel, and of course it was a dedicated circuit, so carrying current on the ground really wasn't a big issue. The inspectors issue with the outlet is that it had a dryer receptacle; someone could hook a dryer up to it and then it wouldn't be compliant. In the area of Utah we lived in, that wouldn't have been uncommon; with large families, sometimes an extra washer and dryer were installed in the garage.
The current carrying ground problem had existed on the welder since it was made; the case, which was grounded, was also electrically connected to 120 volts through the fan. To be absolutely safe, I should have ran a neutral into the case, and connected the fan to that instead of the ground.
You're right, you can file a complaint and make the inspector eat his inspection on something like this. But, he'll work amazingly hard to find other things wrong and make your life miserable. Far better to spend $20 and a half hour on the plug/receptacle changeout instead. Let him win, it' keeps him off your back on other stuff.