Assign document tye to do cancellation of cancellation document(S1)

You can go to tcode VOFA to assign the document type 'S3' to document type 'S1', but remember to put different number range for 'S3'. Please take a look on the printscreen below.

Assign document type 'S3' inside document type 'S1' as below.

Copy control of Sales Order to Sales Order or Billing Order

Go to tcode VTAA and do the follow steps.

There is a lot of sample you can refer to before creating a new copy control by yourself.

Check item is considered for MRP run for sales order item

You need to check your item schedule line in sales order using tcode VA03 to see whether it is considered for MRP run for that particular line item. Your item schedule line must be 'CP' in order to see the sales order in tcode MD04.