Standing in for the injured Michael Clarke, Smith scored a career-high 192 to anchor a stunning tail-end assault on India's bowlers, who leaked 314 runs for the final five wickets at the Melbourne Cricket Ground.
"Our tail have come out and taken the bowlers on," Smith told reporters after pacemen Mitchell Johnson (28) and Ryan Harris (74) piled on the runs.
"Mitch Johnson again today looked good and Ryan Harris came out and batted beautifully.
"I don't think they (India) had an answer for the way they were playing. It's great for us that the tail can come out and do that and be really aggressive."
Returning to the field after tea, Smith ended a 55-run opening partnership by diving low at second slip to catch an edge from Shikhar Dhawan (28) off the bowling of Ryan Harris.
Opener Murali Vijay (55 not out) and number three batsman Cheteshwar Pujara (25 not out) pushed India to 108-1 at stumps, still 422 runs adrift of the hosts' total.
The tourists were lucky not to be two wickets down, however, with wicketkeeper Brad Haddin spilling an edge from Pujara when the batsman was on 12.
Vijay's unbeaten half-century, his fourth knock over 50 in the series, will give India some hope of reeling in the total on the benign drop-in wicket.
"They got a (few) too many runs for our liking," said spinner Ravichandran Ashwin, who finished with three wickets but conceded 134 runs.
"But if you look at the overall game, the score is pretty par for this wicket... It seems slow and pretty flat as well."
Smith's third century from three tests, however, has all but sealed the four-match series for Australia, who lead 2-0.
The 25-year-old smashed 15 boundaries and two sixes to all corners of the sun-bathed ground, before falling short of a maiden double-century when attempting an audacious ramp shot off paceman Umesh Yadav.
Smith's wicket brought the innings to a close and he walked off at tea to a standing ovation from the crowd of over 51,000.
Smith and Haddin had resumed in the morning with Australia still vulnerable on 259-5 but plundered 67 runs before the wicketkeeper dismissed himself with a botched leave that bottom-edged through to India captain and wicketkeeper Mahendra Singh Dhoni.
Mitchell Johnson bolted to 28 before he was stumped trying to slog Ashwin. Bulky paceman Ryan Harris joined in the run feast, belting a career-high 74, his third test half-century.
He hoisted a big six to reach his final score and was out next ball, trapped lbw by Ashwin. By then, Australia were 482-8 and in complete command.
