Other teams are Wizards FC and Civil Sporting, who failed to transfer their perfect run in the super league to the Challenge Cup.
Blantyre United lost 3-0 to Lilongwe Kamuzu Barracks at MDC Ground in Wednesday.
Forward Spikire Fumulani gave KB the lead barely five minutes after the first whistle.
Manase Chiyesa registered his name on the scoresheet on the 44th minute with Kelvin Hanganda hammering the last nail on the hosts' coffin.
KB Assistant Coach Ted Kalinda praised his charges for the galllant fight and promised to reach the finals of the tournament once more this year.
KB lost on penalties to Mighty Be Forward in the final of the inaugural tournament.
"It was a tough game. The win has certainly eclipsed the 3-0 defeat we suffered at the hands of Nyasa Big Bullets.
"Our focus will now be on our next cup games as we want to march through to the final stage. We will not be able to were to the super league title; the gap between league leaders and us is just too big, so we will have to focus on the cup," said Kalinda.
While Blantyre United coach MacDonald Mtetemera observed his boys were "tactically and physically bad" and the visitors more space to play their game.
"We were unable to play our football and got punished for that. Our focus now will be on league games; we need to turn the tables and move out of the relegation zone," said Mtetemera.
Elsewhere, Mzuni FC equally progressed to the next stage after claiming a 3-0 win over Wizards FC at Mzuzu Stadium.
The hosts scored through Deco Nyamera and Timothy Sirwimba (brace). Zomba based Red Lions suffered a 3-1 home defeat to Masters Security at Balaka Stadium.
This year's winner will pocket K12 million, up from last year's K10 million. FISD has increased sponsorship from K45 million to K50.2 million and the final will slated for December 2 2017.