China’s coalbed methane (CBM) resources hold significant potential. However, the widespread presence of soft and low-permeability tectonically deformed coal (TDC) presents a challenge to the efficient development of CBM. The development of CBM through stress relief via horizontal well cavity completion (HWCC) offers a promising innovative solution to this problem. To elucidate the multi-scale reservoir response characteristics of CBM development through stress relief via HWCC in TDCs, this article comprehensively employs particle discrete element and finite element numerical simulation methods, and carries out the numerical simulation studies of cyclic seepage at the specimen scale, HWCC at the coal seam scale, and CBM development at the coal seam group scale. The main findings are summarized as follows. Unlike the stress-compression specimens, which exhibited overall failure, the differential distribution of pressure gradients within the specimens during the gas seepage experiments resulted in the development of microcracks concentrated at the bottom of the specimens. With the escalation of coal body structural damage, the permeability stress compression coefficient during the elastic deformation stage shows an increasing trend. Upon entering the plastic deformation stage, the specimen’s permeability shifts from a decreasing to an increasing trend. Increasing the lower limit pressure ratio, upper limit pressure ratio, and cycle rate of gas injection pressure could accelerate the failure efficiency of the specimens. Increasing the lower limit pressure ratio has a more pronounced effect on the TDC specimens, while increasing the upper limit pressure ratio has a more significant impact on the primary undeformed and cataclastic coal specimens. In TDCs, the phenomenon of wellbore collapse and cavity expansion becomes more pronounced. The cavity volume tends to increase with the increase in the initial well diameter, in-situ stress, and alternating bottom-hole pressure differences. The HWCC could enhances reservoir permeability and production in both the cavity completed and adjacent coal seams. For two horizontal wells with cavity completions in the same layer, excessively close well spacing is unfavorable for fostering inter-well interference and reservoir pressure drop. When the HWCC is applied to thin coal seams, the enhancement of permeability and production is limited. Reasonable optimization of drainage rates could effectively mitigate the reservoir permeability velocity-sensitive damage. The research findings extend related theories and provide a robust reference for subsequent practical engineering applications.