The W123 has a muffler as well as a resonator. I ran without the muffler for a while, then got bored and had the resonator removed. Perfectly fine to remove the muffler.

Mine gets a bit loud though...

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1981 300TD 4 speed manual
Euro bumpers, zender valance and skirts, H&R springs, billy HD's, leveled sls, real AMG Pentas 16x8 et11, vdo boost/egt gauges intergrated into ash tray, eurolights, led 3rd brake light