Dear Vivaan,
As i understand, the default object of a production order will be MAT itself. You need to manually change it to CTR.
When you create an order with material, the default settlement will be to the order material.
Otherwise, try creating the order without material (CO07) with your current settings (as you mentioned, settlement profile default CTR. Also change cost center settlement required from optional - under receivers).
Thanks,
Prem