Many people may reflexively respond that they're excellent at something when they're asked what they themselves think of an ability of theirs. The interviewer is trying to get a better gauge of your time management skill by framing the question from an external perspective. It has the added benefit of assessing your integrity and your relationship with your superiors.

Be honest in your response. If your supervisor would say that you're good at time management, give a brief explanation of your methodology. If your supervisor wouldn't say that you're good at time management, say that your supervisor would say that you could use improvement, not that you're bad. Quickly move on to methods that you have learned and applied. Show that it's the things that you're bad at that you become the most consciously proficient at. End your response assuring the interviewer of your time management skill by saying that these methods are what enable you to meet your deadlines.