I know that the rear seats of my car can be folded, but not sure weather the back rest portion can also go down to increase the cargo space.

The rear seats can be pulled up wheras i dont see any clip which can flaten the back side of the seats. My previous car Volvo 940 Station wagon seats use to get folded.

Anyone who could guide as how to fold the e320 station wagon seats

 

My 95 E320 Wagon has folding rear seats the Headrest comes off first lift it up and press the button down and it comes out do this for all three. lift passenger seat up using the side handle,
jerk the seat back forward and hook it into the pins on the seat bottom, left seat next the same way. Make a lot of cargo space.

 

Thanks for the info. Got it as per your guideline. Have also lubed the catches of the second row back seat as they were dry and were opening after a lot of effort.