When the server is dropped, the server name is released and can be used by anyone during the gap between dropping and creating the server. A potential issue arises if another customer takes the server name, which can cause problems.
Azure PostgreSQL Flexible Server does not guarantee that a customer will be able to reuse the same name once a resource has been dropped, as the name can be taken by any other customer.
You may need to use a different name or try in a different region. If you still require the same name, you need to open a support ticket to check the backend logs or as requested to potentially do a purge/force remove.
Thank You!