Can a professor ask students to upload a picture ID?
The reason for wanting it scanned is so that it can be checked later, rather than in real time. Whether that is reasonable or not, is a decision for the department or university to make. It might be improper to ask that a non-university ID be scanned, but the use of university documents, such as a student ID, is probably within their proper authority.
I think your position is reasonable, but not necessarily the best option. But it might also be that you didn't read the instructions completely.
However, if it wasn't clear that it should be scanned and they just assumed that you would, then you have cause for complaint.
I hope you can work out something satisfactory and that it was just a correctable misunderstanding.