One of the reasons to charge for selection on compulsory reservation trains (or not offer it at all) is that you can allocate seats more efficiently if people don't select. Thus you want only those people for whom it's important to them to do so.
Let's say you have a railway A-B-C, four seats left and five passengers wanting journeys. The first two go A-B and select seats 1 and 2, the next two go B-C and select seats 3 and 4. Passenger 5 comes along wanting A-C and is turned away.
If by contrast you automatically allocate the A-B and B-C passengers into seats 1 and 2, then you can sell not one, but two more A-C tickets.
You can sort of work around it by issuing counted places and passenger 5 having to play musical chairs, but as most people don't care where they sit (or just care about having a table, not which one) charging a small fee to make only those people who care select makes more sense and avoids passenger 5 having issues.