Were you charging it between your specified sleep hours? If yes, then how is it meant to work out you weren't sleeping if the watch isn't moving?
CW
"Sleep" is actually processed by the garmin Servers when the data is uploaded, and is based on movement within the configured "sleep time".
When you say "charging", was it with a wall charger, or plugged into a pc/mac (in mass store mode)? It will likely count that time as "sleep" in either case, but in mass store mode, instead of having no movement in that time, it would have no movement data at all during that time.
I'm guessing that if you turned off the watch, you'd also see sleep data during that time.