Whether the barber should have killed Captain Torres is a question that heavily depends upon one's personal feelings on revenge. Some might argue the barber had a duty to kill the Captain and avenge those poor rebels he has killed or ordered killed. The reality of the situation is much more complex. Captain Torres is obviously not the only person involved in the mission of tracking down the rebels. Therefore, it is reasonable to assume there is a Lieutenant or other subordinate at the ready to assume command of the mission. The killing of Captain Torres may bring about even more scrutiny on the tiny village. The barber must also think of these things.
The other matter the barber must address is his own conscience. He states quite clearly he is not a murderer and trembles when the Captain walks into his shop. The barber has his own pride about his job. The barber had much more to lose than gain by killing Torres. The rebels may have come under greater threat and his own conscience would suffer. In the end, there was little choice for the barber but to cut Captain Torres' beard and let him walk out of his shop.