Upon closer inspection I see that smart-tab-mode refuses to activate in org-mode, so the behavior you're seeing probably is not caused by smart-tab.
For me, if the point is on an Org heading without text, like (point marked by "|"): * | lorem ipsum and I press TAB, Org indents the heading, cycling through the levels. If there is any text after the * on the heading line, it cycles its visibility instead.
