Hello Jo,
The <h3> heading is included inside the itemListSubCategories div, you can either strip it from your category.php or override it's text string using Joomla!'s language override functionality.
Keep in mind that if your desired template is not showing up there might be an error in your setting inheritance or a 3rd party extension (like a templating framework or a K2 plugin) is causing this.
JoomlaWorks Support Team
---
Please search the forum before posting a new topic :)