There probably was no shredding at the auction - there are likely two images in the frame, one pre-shredded to a certain point. Look at the color of the "shredded" print. It's not the same - it's darker, probably didn't age as well 'cause it was cheaper paper. Not to mention that using two images is vastly simpler mechanically and economically than actually shredding it. You just have to roll up half of one image while rolling out half of another (shredded) image. Making a shredding noise is a lot simpler than shredding (and fits in a smaller frame.) There are so many magic tricks that exploit our expectation in just this way (such as sawing a lady in half.)

Of course, it's not in Banksy's interest to reveal the trick immediately. Let the publicity build.