ATUL,
I think good students who do all of their work (and are the natural "A-students") are likely to get offended by classmates they see not doing all of the regular work required of all, but getting extra credit. It's not the activity or project that is problematic; rather it is the giving points or credit for something above and beyond. For me, I just choose not to give EC. But each teacher and institution has to decide what works best for their setting.
Barry Westling