That is because the Germans did not allow such a puppet state to come into existence.
They were required under the terms of the German-Soviet Boundary and Friendship Treaty of 28 September 1939 not to allow such a state to come into existence.
The Government of the German Reich and the Government of the U.S.S.R. consider it as exclusively their task, after the collapse of the former Polish state, to re-establish peace and order in these territories and to assure to the peoples living there a peaceful life in keeping with their national character. To this end, they have agreed upon the following:
The Government of the German Reich and the Government of the U.S.S.R. determine as the boundary of their respective national interests in the territory of the former Polish state the line marked on the attached map, which shall be described in more detail in a supplementary protocol.
The necessary reorganization of public administration will be effected in the areas west of the line specified in article I by the Government of the German Reich, in the areas east of this line by the Government of the U.S.S.R.
Apparently Stalin didn't want there to be a Polish state. German Ambassador in Moscow Count von Schulenburg wrote a report to Hitler of a meeting he had on 25 September 1939 with Molotov and Stalin:
Stalin and Molotov asked me to come to the Kremlin at 8 p. m. today. Stalin stated the following: In the final settlement of the Polish question anything that in the future might create friction between Germany and the Soviet Union must be avoided. From this point of view, he considered it wrong to leave an independent Polish rump state. He proposed the following: From the territory to the east of the demarcation line, all the Province of Lublin and that portion of the Province of Warsaw which extends to the Bug should be added to our share. In return, we should waive our claim to Lithuania.