It comes up in speech options for me.
So with one guy who works on the stables, I asked how he felt being outside the city walls with the dragons about, and he challenged me to a brawl to prove he wasn't fussed. There have been a few others as well, like one guy who I wanted to stop pestering this woman, and there was a chance to intimidate him. The intimidation didn't work, so he called my bluff and a brawl started. When it's specifically a brawl like that, no one else gets involved and you don't kill them (just don't take out a weapon or spell!). When their health goes, they just crouch and then accept that you're the winner.
[edit] I'm really not sure what would happen if you just decked a guy for no reason, but I'm assuming that it would be classed as assault/a crime because there was no provocation or anything like that.