It is very colloquial, and in this context means "reduce" (so that you can reduce that pungency). "Knock back" has got lots of interesting uses in English: to "knock something back" means to drink something (usually alcohol) fast, in a few gulps. Also you can be "knocked back" by an unexpected problem (meaning, feel worried, unsure, disappointed). You can "knock back" dough which has risen when making bread (meaning push the air out of it). In general, "knock back" means physically push something back (but in this example is used figuratively - "pungency" isn't really a physical object but is being treated as one).