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Is this spacer necessary? What purpose does it serve? I replaced the wheel seals with new ones from Max Merritt (rubber seal material), which are different from the old ones. The old ones have the felt seal material and had a larger opening which slid over this spacer. With the spacer on the spindle and when the hub is installed,I am not able to insert a cotter pin. Without the spacer I am able to insert a cotter pin.

Also with the new wheel seals, that spacer doesn't slip over the rubber material, it just presses against it and when I install the hub with the nuts and washers used to install and after taking it back off, the rubber is slightly pinched in areas.

I was only able to take a picture of the spacer and old seal right now.
This is for a 1937 120c

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I don't recall spacers being used on my 115C, which most likely has the same front suspension as your 120C. The parts manual will tell the tale. Perhaps the spacers are only needed with the felt seals and the modern lip type do not need them. Perhaps Flackmaster can shed some light on this.

Seems to me if Max was the supplier, that's who I'd ask first.

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They didn't supply the spacer. The spacer was on the car already when I disassembled. But yes, I can call Chris as well at Max and see if he may know. Just also wanted to check on here first.