The subjunctive mood is correctly used in D, that is, in "I demand that they be punctual". In this case, the subjunctive is used because the meaning is close to the unrealness, that is, the speaker believes that for them to be punctual is almost impossible.
The subjunctive mood consists, in this case, of the verb "to demand" and the past subjunctive mood. They mean the present time but they refer to impossible situations or situations that the speaker believes to be unlikely to happen.
To use your example, cede does mean to go. However, "recede" means to draw back or go back. Think of an ocean. What does the tide do at certain times? It recedes!
C. From the looks of fear and distrust, he would have guessed that before long his arrival would be the talk of the whole town. He saw nothing of all this. People with trouble do not look behind.