At the start of Soul Eater, Maka and Soul are tasked with hunting the soul of a Witch to turn Soul into a Death Scythe. The target is normally assigned by Lord Death as to avoid the Meister/Weapon group from getting killed.
During Maka's/Soul's fight with Blair, Death comments that there's "something odd" about her (right before he Reaper Chop's Spirit for Spirit's comment on Blair's body), then we learn she is actually a cat with a lot of magic. As a consequence, because Maka and Soul messed up the final soul, their previously collected 99 souls were confiscated.
From what Death said during the fight, it didn't seem as if it was a test to see if Maka and Soul could correctly identify a Witch. So I am wondering, did Death know Blair was a cat? If not, why did Maka/Soul get punished when he himself thought that she was?