@previousversiondocs Can you kindly validate & make sure your VMSS Upgrade policy is set to either Automatic or Rolling update ?
az vmss show --name vmssname --resource-group rgname --query upgradePolicy.mode
https://learn.microsoft.com/en-us/training/modules/build-app-with-scale-sets/7-exercise-update-applications-virtual-machine-scale-sets
If the upgrade policy was set to Manual , then the CSE extension which was applied at the VMSS level will not be propagated to the underlying Instances unless you do a manual upgrade of the instances or you when you add a new instance! If the upgrade Policy is set to Automatic , then the instances will also get the CSE extension upgrade!
You can find more details:
[https://learn.microsoft.com/en-us/azure/virtual-machine-scale-sets/virtual-machine-scale-sets-upgrade-scale-set]
Regards,