Cannibalism was definitely reported and common. Normally if found to have occurred, and if the government official so desired, punishment was severe to include execution of the offenders. The thing is, while there were definitely punished instances of it, there were also plenty of cases where it wasn't. It's kinda hard though as it was so common that it wouldn't have been possible to prosecute everyone taking part. We even have records of local government officials hiding evidence of such acts, for fear of being punished themselves by higher-ups.
Human flesh was sold on the black market, and there are plenty of police reports on the topic of the consumption or sale of the meat. Quoting from Dikötter's Mao's Great Famine:
Human flesh, like everything else, was traded on the black market. A farmer who bartered a pair of shoes for a kilo of meat at the Zhangye [张掖] railway station found that the package contained a human nose and several ears. He decided to report the finding to the local Public Security Bureau. To escape detection, human flesh was sometimes mixed with dog meat when sold on the black market.
Basically, the practice of cannibalism itself was incredibly widespread.
So then on to the banquets. The relevant paragraph from Mao: The Untold Story is as follows:
The authorities staged “model demonstrations of killing” to show people how to apply maximum cruelty, and in some cases police supervised the killings. In the general atmosphere of fostered cruelty, cannibalism broke out in many parts of the province, the best-known being the county of Wuxuan [武宣], where a post-Mao official investigation (in 1983, promptly halted and its findings suppressed) produced a list of 76 names of victims. The practice of cannibalism usually started with the Maoist staple, “denunciation rallies.” Victims were slaughtered immediately afterwards, and choice parts of “their bodies—hearts, livers and sometimes penises—were excised, often before the victims were dead, and cooked on the spot to be eaten in what were called at the time “human flesh banquets.”
A similar story is recounted in Equity in the Chinese Law: Its Origin and Transformations
This mass mobilisation undoubtedly carried with it a certain element of coercion. The slogan "Whoever does not stand with us is against us!" carried with it not only a revolutionary enthusiasm, but a hidden oppressive message to divide the masses. Join us, or be our enemy! Such a black and white dichotomy suppressed the need for persuasion but more importantly, removed the freedom of choice. Emancipation, as assumed in such mobilisations, took such a totality that it allowed no alternative to challenge itself. The participants were more than spectators, but also involved in open, dramatic execution of the antirevolutionaries, where the masses shouted "kill, kill, kill" until their throats were sore and voices hoarse. Such extremism was further fuelled by vindictiveness from the peasantry. The cruel local tyrants were now avenged by the peasants through the same technique of the ‘human flesh banquet’, by which the victim was sliced, cooked and forced upon his family members. Such a revengeful bloody atmosphere was not much different from the traditional narrow-minded peasant vengeance, especially couched in local communities or clan patriotism. In general, such spontaneous cruelty augmented rather than defeated the communist revolutionary zest
This cites Lucien Bianco's Peasant Movements, which I don't have access to and so can't account for the validity of that source's sources. However, if we take it at it's word, it does slightly change the mood of the event you're asking about. Banquet's not quite how I'd translate it.
See also:
Becker's Hungry Ghosts: Mao's Secret Famine. Has a whole chapter on cannibalism during this period.
Dikötter's Mao: The Untold Story, quoted above
Lin's Equity in the Chinese Eaw: Its Origin and Transformations, quoted above