Hi guys. Sorry for late reply. Yes, I was quite puzzled as to why I wasn't able to launch a lite version (I locked 2 characters and 2 game modes left only 1 character and 1 game mode for player to try) but there are so many lite versions out there in the appstore. It's iOS appstore by the way, sorry for the confusion caused.
LITE versions or demos are allowed on the store, but if you read the fine print you're not allowed to show any features of the full game blocked out. I submitted a lite version of my game ages ago with some game modes crossed out and they rejected and pointed this out to me. Bit odd that they didn't give you the specific reason but that'll be why it was rejected.
If you just remove any reference to it being a demo and don't show any cut off features you should be fine.