Both sentences are correct.

I don't see why (2) is "wrong". It may be informal; see definitions 2 and 2.1 of the OED (http://www.oxforddictionaries.com/definition/english/smoke); to be perfectly clear, the second statement could be rephrased as "I've never smoked tobacco in any form." or something similar. On the other hand, (1) may be considered by some as logically incorrect because it's not possible for humans to survive for long without drinking some kind of liquid.