Command not found with builtins and variables

[bugs]

Hi,
I'm not exactly sure if the following is actually a bug or whether bash
is actually supposed to behave like this. However, I couldn't find any
documentation concerning it so I decided to ask.

The thing I noticed is that when setting a variable and then running the
command "time", bash reports "command not found". For example, the
command:

TEST=1 time ls

Results in "bash: time: command not found"
At first, I believed that this was inherent to the bash builtins but I 
discovered
that

TEST=1 cd

Works without any problems, so I am confused as to why bash behaves in
this manner. Is there any underlying reason to this behaviour or is this
a bug?

cheers,
project-repo