I couldn't leave this one alone.
So you like the fact that Paladins can choose who is evil and who isn't?
Not quite. I like the fact that Paladins can choose who they
think is evil, and who isn't. And act according to what they
think is true. I reject evilness as something that something
is. Or goodness, or chaoticness, or lawfulness. It's cartoonish and silly.
I think it's far more interesting for a Paladin to smite something, successfully, and later find out it wasn't really evil after all, than for a Paladin to smite something, then rest easy knowing that it was inherently evil (or else the smite wouldn't have worked), so he was automatically right to kill it; no muss, no fuss, no thought, no drama.
Instead of something being actually evil, the Paladin can make that choice for them and Smite the hell out of them.
What determines that something is "actually evil"?
And the Paladin isn't choosing for someone else that they are evil. He's only choosing to judge them as evil.
The Paladin would still have a code. An honest (Good) Paladin would not lightly judge others as evil, and upon judging wrongly, would be horrified to discover his mistakes. A dishonest Paladin might very well find NPC Paladins hunting him down for his betrayal to his code.