AoA,
Mubeen your experience is not different than mine, but you know what? I studied in Punjab University Law College Lahore, as regular student. I am also from same town as you are from. I also applied at Punjab College's branch recently opened in S.K.P. but i was rejected too. I applied there not because of financial reasons, but because i thought that after learning, it becomes one's moral obligation to teach others, and share knowledge; experience. I have come to know through a reliable source that the owner of the college has paid a hefty amount to Mian Amir, in order to obtain the license. Although, P.C.C Lahore campuses follow a very strict criteria for selecting the lectures but their branches out side Lahore are pure business ventures. Most of the lecturers in these colleges are near relatives of the some one in the management.
I personally do not think that those candidates who have studied as regular students are preferred over the one's having private education. They rejected you because they had already appointed some one for obvious reasons (nepotism). So, cheer up, Inshallah you will qualify to be a CSP officer.
Allah Nighaban-o-Nasir.

__________________
" None are more hopelessly enslaved, than those, who falsely believe that they are free"
Goethe