When you create your provisioning profile and certificate in "Certificates, Identifiers & Profiles" on Apple's Developer web site - you have chosen the wrong type of provisioning profile. You'll need to choose "In House" from under the "Distribution" headline in order to get the right kind of profile.
Yes, you can submit such apps! I have done so before and got them approved.
You’ll probably be asked to provide more information about your setup, or be asked to provide a video of you actually using an iOS device to control the hardware.