I'm guessing by her comment that her kids are older and that she did not have a party for them when they finished 8th grade. She might fear they will be upset and ask why they didn't get a party? She might feel like she needs to justify her actions? Try to remember that her comments really reflect her insecurities, not your actions.
I grew up in Springfield, IL, and there are several Catholic schools, all of which celebrate Confirmation towards the end of 8th grade, and make a big "to do" about graduation. It is a big deal, lots of celebrating. Not sure the public schools do anything. There is no right or wrong, just how your school and the students and parents choose to handle it.
You can just say, our school does have a graduation, we would like to celebrate this milestone and it's a great excuse to get the family together. We don't see each other often enough, and we really miss it.
Celebrate! And have fun.