On the Update license assignments page, if you see that some checkboxes are unavailable, it indicates services that can’t be changed because they’re inherited from a group license.
Sign in to the Azure portal using a License administrator account in your Azure AD organization.
Select Azure Active Directory > Users, and then open the Profile page for a user.
Select Licenses.
Select Assignments to edit license assignment for the user or group. The Assignments page is where you can resolve license assignment conflicts.
Select the check box for Office 365 E3 and ensure that at minimum the all of the E1 services that are assigned to the user are selected.
Clear the check box for Office 365 E1.
Select Save.
Azure AD applies the new licenses and removes the old licenses simultaneously to provide service continuity.