How far is too far?

Has this ever happened to you? You're the GM, you've spent several sessions fleshing out your BBEG. You've tried to give him some sense of humanity, even though he is quite brutal and ruthless.

Your players finally corner him and manage to defeat him in an epic battle. However, they stop just short of killing him. Instead, the players announce that their characters are going to torture the BBEG to death in a vicious and chillingly well thought out way. They do this completely unironically and refuse to see how hypocritical their actions were.

>DMs

How far do you consider too far when dealing with bad guys?

How do you deal with it when your players run around acting like some cross between the Punisher and Jigsaw?

>Players

Have you ever done this as a player? When, how and why?