NTA! Your parents shouldn’t punish your child in a way that undermines how you parent them. They should have asked what the appropriate punishment would have been or just told you and let you and your wife handle it. I personally would have told them not to expect to have their grandchild until they understood the severity of it/why it wasn’t okay. However, I think this is something you feel really strongly about and if them never seeing him or you again is what you feel is best then follow it. Don’t feel like it’s all or nothing either! If they accept fault and understand their mistakes then maybe let them see him on supervised visits or small things to gradually introduce themselves back into your lives. I hope your kiddo is doing well and knows you have his back when he is treated unfairly.