If he doesn't want to call for a test waiver (in writing) then it seems your comapny has no option except to fulfill Code requirements. If you do not then your Company may be held liable for Contract issues and end up in a prolonged court battle. If you are the QC involved your name will be right in the middle of the issues.... Good luck, if I were you I would put my hands onto a B31.3 and really study the issue. RT + Hydro testing.
Well, since he is your boss, seems like the only thing you can do is: upon completion of job, initiate an NCR stating that proper inspection and testing was not performed or allowed to be performed because of Boss' interpretation of spec. See if he will sign off on it, accepting the piping. He probably won't so, write whatever else on the NCR explaining the situation without pointing the finger too much, but enough to explain. Then I would also write in a log or notebook or whatever, explaining EVERYTHING in detail and put it in the QC job file which hopefully is under lock and key. Make copies of everything and store in a seperate place, just in case. CYA
Ask your boss if you can call to verify this interpretation of his. If not, tell him you cannot and will not accept the responsibility of this. Before you do as stated above, tell him you are going to write an NCR on it. We are all plagued from time to time with witnessing something that is not right, and forced to turn a blind eye. But this should only happen when you superiors overide you. Then, all you can do is document and file.
This is just what I would do. Remember, CYA