Hi Sheetal,
I assume that the RFC destination that has been used to define the Gateway alias in the customizing is not correct.
Please check Step 3 of my quick starter guide:
http://scn.sap.com/docs/DOC-41416
Instead of "NONE" the RFC destination should point to your Gateway hub system where IW_FND and GW_CORE have been deployed.
(I used none because in my sample system IW_BEP is also deployed in the hub and it can act thus as its onw backend)
You can check this using transaction SM59 in your backend looking for the ABAP connection that has been maintained in the Gateway alias customizing and try to perform a remote logon. You should end up in your hub system.
Though this should be fixed you are also able to activate the service from your hub system by running transaction /IWFND/R_MGW_REGISTRATION in the hub and press "add service".
Please also check Step 2 of the guide whether your system alias settings for your backend (from a hub perspective) are correct. It is especially important to maintain the field System ID that contains the SID of your backend system
Best Regards,
Andre