Webpack5 don't compile anymore (dart) SASS files and background image doesn't show

Question

I've tried numerous ways to make a background-image to show but nothing worked and now my Sass files won't compile either.

No error is shown anymore but styles are not in place, just html.

webpack.config:

const path = require('path');
const HtmlWebpackPlugin = require('html-webpack-plugin');

module.exports = {
  mode: 'development', //production
  entry: {
    main: path.resolve(__dirname, 'src/app.js'),
  },
  output: {
    path: path.resolve(__dirname, 'dist'),
    filename: '[name].[contenthash].js',
    assetModuleFilename: '[name][ext]',
    clean: true,
  },
  devtool: 'inline-source-map',
  devServer: {
    contentBase: path.resolve(__dirname, 'dist'),
    port: 8080, //default 8080
    open: true,
    hot: true,
    watchContentBase: true,
  },
  //loaders
  module: {
    rules: [
      //css
      {
        test: /\.scss$/, use: ['style-loader', 'css-loader',
          'sass-loader']
      },
      //images
      { test: /\.(svg|ico|png|webp|jpg|gif|jpeg)$/, type: 'asset/resource' },
      //js for babel
      {
        test: /\.js$/,
        exclude: /node_modules/,
        use: {
          loader: 'babel-loader',
          options: {
            presets: ['@babel/preset-env'],
          },
        },
      },
    ],
  },
  //plugins
  plugins: [
    new HtmlWebpackPlugin({
      title: 'Just a Demo',
      filename: 'index.html',
      template: path.resolve(__dirname, 'src/index.html'),
    }),
  ],
};

package.json

  "devDependencies": {
    "@babel/core": "^7.14.8",
    "@babel/preset-env": "^7.14.8",
    "babel-loader": "^8.2.2",
    "css-loader": "^6.2.0",
    "html-webpack-plugin": "^5.3.2",
    "style-loader": "^3.2.1",
    "webpack": "^5.45.1",
    "webpack-cli": "^4.7.2",
    "webpack-dev-server": "^3.11.2"
  },
  "dependencies": {
    "normalize.css": "^8.0.1",
    "sass": "^1.41.1",
    "sass-loader": "^12.1.0"
  }
}

main.scss file (I'm using @use and @forward) - it worked previously so I assume the way I imported files was correct. Now the same thing shows in main.css file which is strange

@use 'abstracts';
@use 'base';
@use 'layouts';
@use 'pages';

and my project structure

project structure

It would be great if someone can help me out as it's been driven me crazy for more than two weeks now

Thank you!