...gah, also long since beaten to it!! Curses.
This depends on one thing. When you charged and made your attacks, did you then Consolidate yourself?
If you didn't, that could have put the last model back in Engagement Range and would then have made it eligible to fight.
If you did, and the model was still out of Engagement Range, then I'm afraid your opponent was right.
Page 229 tells us that units only Pile In once they're chosen to Fight, and to be chosen, they must be eligible. Page 228 describes an eligible unit as "one that is within Engagement Range of an enemy unit and/or made a charge move in the same turn".
If there are no models left in Engagement Range, they aren't eligible and therefore have no permission to Pile In.
It's probably a moot point, regardless. It sounds like you wouldn't have been able to surround that one remaining model, meaning it could quite easily make a Fall Back move in your opponent's next turn, leaving the outriders open to being shot to pieces anyway.
One last note on this, note that both Pile In and Consolidate moves are described as "
can move
up to 3 inches", as long as that move ends nearer to the closest enemy. The "can" part makes this move optional - the model will be considered to have Piled In or Consolidated, but needn't have actually moved - and even if you do, you can opt to move it 0.1 of an inch closer if you want. This makes it quite possible to engineer combats so that you have a certain number of models in Engagement Range, or indeed none.
Moving onto Smite - you've read this correctly, psykers can indeed cast Smite into the combat they're locked in (and because Smite affects the closest enemy unit, they are in fact pretty much forced to cast it there!).
It helps to realise that psychic powers are
not shooting attacks, unless specifically stated.
And yes, it is powerful, but psykers are powerful and they pay the points cost for that privilege.