Hi,
Please read the basic description of the process.
http://help.sap.com/saphelp_ewm70/helpdata/en/d0/742db819ae464db441f80ab6963e4f/content.htm
You may configure a return document to standard IDPD, which can be created in EWM and which can trigger reverse material document for production GR in ERP.
There is no standard way how to cancel production order from EWM.
Petr