You will probably not like opinion, but since you asked, I will answer. Yes, it is bad manners. However, as a person of good manners, you should also know that it is impolite to correct bad manners in others, unless it it one's own offspring. And even then, it should be done privately. Since you stated that this person is not your offspring, it was neither your responsibility, nor your right, to correct them.
Family gatherings should be fun and loving. Since it is well known that this person says it at "every" family gathering, perhaps it is their way of complimenting the cook on providing a delicious meal? For any family gathering, one should always prepare more than enough food to completely satisfy everyone's hunger. If you know that particular dishes are this family member's (or any other family member's) favorite, you should prepare enough to be able to answer, "As much as you can eat," when asked "How much can I take?" And let the rest of your conversation be about catching up on family news and accomplishments.
JMO,
Kathleen
Chamonix Broderie