They did this to me during my time in the Army. I was going along well within my height/weight limits when, all of a sudden, before the next PT test, I was classed as "overweight" by five or so pounds. Now, this can be a death sentence in the New Army, requiring counseling, additional training, additional testing, and a fast discharge if you don't reduce your weight, unless you still pass your body-fat percentage test.
So, a week or so before every PT test for the next several years, I'd starve myself and eat nothing but light soups and salads and purge myself with ex-lax so that I could come in underweight at the weigh-in. However, this also caused me to catch every cold, sore throat, or flu that was within a 12-state area during that time.
Finally, the last five years in, I just gave up trying to make my weight because I knew that I was well under the allowance for body-fat percentage. Since that time, I haven't been sick or missed a day of work for an illness. If Tom Cruise is 5/7" and 201, I didn't know that I looked that well at 5'6" and 205. Anyway, I still run PT with my subordinates and can finish my two miles in right at 10 minutes, still doing 75 push-ups and 75 sit-ups before each run.
Yet, by my height/weight limits, I would be considered "morbidly obese" or at best simply "obese".
Screw 'em ...
You said it was a death sentence but went on to say that if you passed the body fat percentage it was not. Sounds like you could pass that and the only misery was at your own hands trying to reduce weight.
Read the BMI guidelines. If you are muscular, you may not be considered to be obese.