Grass Block cannot be turned into mud.

I can confirm this behavior although, I'm pretty sure this is intentional. Dirt-type blocks such as coarse dirt, rooted dirt, and dirt itself, can only be converted into mud when using water bottles on them, and not other blocks such as grass, podzol, mycelium, etc...

This is pretty inconsistent, since grass, podzol and mycelium are dirt-type blocks. This goes completely out of logic.