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Serves them right for trying to railroad you into being "evil"
Amen. As a DM it is completely fine to generate challenging "food for thought" situations for their players, but when you start to play against your party and actively sabotage their characters, decisions or playstyle, it's time to step down as a DM.
For a while I've been getting the impression that some DMs are the same as power players, they just feel validated by having the Golden Rule to wield.
To justify this sort of thing with "it's what my villain would do" is about as bad as when a player does it.
The issue with this kind of thing is almost never the actual challenge or moral dilemma, wherever and however it may spring up - it's usually about trying to narratively 'pants' a character with a poorly contrived But Thou Must or Sophie's Choice, and the most generous interpretation of that action is that the GM feels that the suffering of a PC will help tell a good story. I find more often that these scenarios pop up in Humiliation Conga campaigns, where the GM just gets a kick out of creating worlds and encounters that primarily serve to inflict pain and misery on the PCs, and sometimes even the players themselves. And that's not to say that those kinds of stories and settings can't work or be enjoyable (Paranoia and the character-focused 40K games like Rogue Trader come to mind) but it has to be the kind of story that everyone at the table wants to tell.
And the problem with an actual moral dilemma is that nobody knows the right answer. It can work great for establishing your character and seeing how they react to a situation with no clear answer, but you can't just have God say "no, you're wrong" and have it be satisfying. At least, not unless you're prepared to have the paladin say "no, you're wrong*, and eventually become a god of their own. I imagine that would be very satisfying. Still probably something you should talk about beforehand though.
My favorite example of an actual moral dilemma is in No Man's Sky, of all places. You meet someone early in the game, and find out that they're actually dead and what you've been talking to is just their soul trapped endlessly transmitting a distress signal.
No Man's Sky spoiler
You capture their soul in an electronic mcguffin, and have a choice between putting it in a simulation of the universe so they can continue to "explore" (which is eerily similar to what the player is doing, now that I think about it), or open it and let their soul free, killing them for good and letting them rest in peace.
I spent longer making my decision there than I have with any other decision in any other game. I absolutely love that nobody ever suggests that you made the wrong choice, no matter what you decide. I hope to one day make my players think that hard about a decision in my campaign.
Can't you ask them? Also, how hard is it to stick your soul in a simulation? That sounds awesome.
The character doesn't know they're dead. In D&D, the players might be able to ask, but in NMS, you have to choose without even knowing what they would prefer.
If you choose option A, you can opt to tell them the truth about their new simulacrum of a life later on, but I chose option B, so I don't know how they respond to it and the wiki doesn't say.
Why can't you choose option A, tell them, and then if they say that they'd prefer option B, delete the simulation?