The teflon tape is unlikely to last long in the presence of hydraulic oil but does indicate your outer seal is failing.
Since you have had it apart once it won't be hard for you to replace the seals properly.
When ordering your seals pay attention to the notice at the foot of the Parts Catalogue page for the Rockshaft Piston Cover Valves - Page 119:
"(A) IF ORIGINAL ASSY. DOES NOT CONTAIN 2 PACKING RINGS CH11560 & CH10568 SUB (1) M801895,
CH15143 AND (1) CH10568"
Regards,
:wrench: