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Hello,

paragraphs in MS Word don't work in the same way than HTML. We recommend you to open MS Word and generate a new paragraph with the output you'd like to get, as you can check, you can't apply a padding to a paragraph unless you add a border, this border allows to set custom internal paddings. The current version of HTML to DOCX doesn't allow applying a spacing value when adding a paragraph border, so you'd need to use a custom paragraph style:

$style = array(
    'backgroundColor' => '#999999',
    'border' => 'single',
    'borderColor' => '#999999',
    'borderWidth' => 1,
    'border_top_space' => 20,
    'border_bottom_space' => 20,
    'textAlign' => 'center',
);
$docx->createParagraphStyle('myParagraphStyle', $style);

$html = '
    <p class="myParagraphStyle">My paragraph</p>
';
$docx->embedHTML($html, array('wordStyles' => array('.myParagraphStyle' => 'myParagraphStyle'), 'strictWordStyles' => true));

paddings and margins applied to paragraph are added to phpdocx in the same way than MS Word and both values increment the margins from other contents/margins.

As alternative, and maybe easiest approaches, you could use a table with a single cell or add a textbox.

Regards.