Story taken from Myths and Legends of the Celtic Race by T. W. Rodeston
An Ulster lord gathered all the heroes together in order to make trouble by setting them against each other to find out who was champion. Eventually they narrow down to three heroes: Laery the Triumphant, Cuchulain, and Conall of the Victories.
These three agree to settle the matter by summoning a demon from the lake.
The demon suggests a test of courage. One of them may cut off his head, but the next day he will return the blow.
Neither Laery nor Conall accept the challenge, but Cuchulain agrees and cuts off his head.
The demon then picks up his head and sinks back into the lake.
The next day the demon reappears demanding Cuchulain's neck.
But instead of cutting his head off, the demon hits the butt of his axe on the block and declares Cuchulain the Champion of Ireland.
If you are interested this is the book: page 133