Weird situation in sit n go

[Peter]

Yesterday a weird situation came up in a sit n go.
I raised and the BB called. After he put his chips in he turned his cards over while we both had some chips left. I have heard stories about hands being dead when shown in tournaments before all action is over, but since it was HU I am assuming it's not so in this case. I'm not sure though. Can someone clarify?

The guy showed A6 and the flop came AA2. Everybody laughed at his good fortune and he bet his last chips. I called since I had AJ. Since the action was over now, I showed my hand and he mucked his hand, and by mucking I mean throwing it face down over the betting line. In this casino they have the very strict rule that everything that goes over that line is not yours anymore and they follow this rule religiously. Before the dealer put the cards in the muck I argued since it's a tournament and the player is all-in he should get to keep his cards until all the cards are out. Am I right on this or not?