The reason this doesn’t work is tied to the need to specify the axis of indexing (mentioned in http://pandas.pydata.org/pandas-docs/stable/advanced.html). An alternative solution to your problem is to simply do this:
df.loc(axis=0)[:, :, 'C1', :]
Pandas gets confused sometimes when indexes are similar or contain similar values. If you were to have a column named ‘C1’ or something you would also need to do this under this style of slicing/selecting.