You only have to issue Form C to the Mumbai dealer, who is issuing the Tax Invoice. You didn't mention your location.
Further, please mention if the Mumbai daeler has charged any CST/VAT. Form E-1 is for claiming exemption from CST on subsequent sale.
Note the following extract :-
It is also held by judiciary that transfer of documents can take place even by instruction. Therefore it is not necessary that the sale by transfer of documents takes place when the document is first taken out between first seller and his buyer and then transferred by the buyer to his buyer. The buyer of first seller can give instruction to dispatch the goods directly to his customer. If such instructions are given and accordingly the goods are dispatched to third party (i.e., buyer’s buyer) it is because of transfer effected by the buyer of first seller. The transfer takes place while booking the goods in transport and this is also a transfer during course of movement. This is known as notional or constructive transfer. Since this transfer is taking place during course of movement from one State to other it is eligible for exemption u/s. 6(2). In such case the first seller is consignor and the buyer’s buyer is consignee. However the commercial bills will be by first seller to his buyer and then by the first buyer to his buyer. In such a case to enable the first buyer to claim exemption, E-I form is to be issued by first seller to such first buyer.
Thus, Form E-1 will be issued by the Gujrat dealer to your supplier and Form C will be issued by you to your supplier.
10th February 2011 From India