Resolution:
You can use the debug statements in the transitions between the activities as follows:

&ltTransition FromActivity="ProductAuthorizationWorkitem" ToActivity="MyApplyrulebase">
    &ltDescription&gtJust to print the activity flow for debugging purpose</Description>
        &ltRule>
            &ltParameter name="thisStepID" type="string" eval="variable" direction="in"&gtStepID</Parameter>
            &ltParameter name="result" type="boolean" direction="out"/>
            &ltCondition format="bsh"><![CDATA[
            result = true;
            System.out.println( "Debug statement:---- Transition from ProductAuthorizationWorkitem to MyApplyrulebase is " + result + ", and Step id is:" + thisStepID) ;
            ]]></Condition>
        </Rule>
    </Transition>

In the above example you, it is printing a debug statement stating that the following activity will be called after the present activity(ProductAuthorizationWorkitem), and it will also print the out parameter of the ProductAuthorizationWorkitem activity StepID.  

These entire debug statements will be printed in the $WAS_HOME/logs/&ltserver-name>/SystemOut.log file.

How to have workflow DEBUG statements in SystemOut?