Dear Patryk,

Isn't it possible to cancel the order placed by the customer upon successful payment. ? Why is there a limitation set to permit cancellation only on unpaid order?

Paying for the order has many consequences. It changes some related statutes, triggers some actions in store. It's unsafe to cancel a paid order, you can always make a refund. It's the best way to "cancel" paid order.

Totally agreeing with you at developer point of view. But while thinking as a user , especially as a seller-> I think there should be an option for order cancellation before shipping. This can save the unwanted shipping charge and other formalities on vendor/customer side during the return process. What you say?

In such cases, customer usually sends a message to the store owner. It's possible to add order notes. I think it can be handled in that way.

Is there an option to notify the vendor when an order  is placed from a customer? I can see that only admin is informed about the order ...

Of course it's possible. Just activate the OrderPlaced.VendorNotification message template.