Punishment not unknown in Cornish town (7)
I believe the answer is:
penance
'punishment' is the definition.
(I know that penance is a type of punishment)
I can't explain the remainder of the clue.
(Other definitions for penance that I've seen before include "Act of atonement" , "Hardship" , "Amends" , "Punishment inflicted on oneself" , "Self-inflicted punishment for wrongdoing" .)