If there are shims between the clutch location spacer and the clutch, don't remove them without checking the alignment between the clutch basket and front sprocket. On a standard primary, I consider the chain alignment much more important than that seal.
L.A.B. provided the instructions for the seal and it gives ways to get more clearance.
If you take the basket off, double check that the clutch location spacer is installed correctly - its recess must fit over the circlip.
Some here hate the tab washer - I like it but it is imperative that #58 be used with it:
https://andover-norton.co.uk/en/shop-drawing/65/chaincases-chains-sprockets-clutch-alternator The tab washer is malleable, and the nut will dig into it without #58