I have a performance exhaust on my Smart car and my engine light has come on, is the exhaust faulty?

No not necessarily, the smart car has set parameters for all the engines settings, by changing them from standard you run the risk of the engine management unit thinking there is a problem.  Changing any part of the car can cause this but exhausts and air filters are most common.

NB. You can buy a unit that fits between the exhaust and lambda sensor that alters the reading reducing the chance of the engine light coming on.