The abandoned Mardi Gras float that Carface, Charlie, Itchy, and the rest of Carface's gang use as a hideout (it can be seen about 12 minutes 20 seconds into the film), which more than resembles a huge, skeletal demon.
The film sports a disturbingly vivid sequence that is mostly recalled for putting the fear of divine punishment and existential dread in its young audience. Our protagonist, Charlie, has returned from Heaven to the Earth but is warned by an eerie voice that he can never come back; when the watch that is ticking away his life stops, that's it. This leads to a scene where the watch stops and Charlie is sucked into Hell. Now he's trapped on a ship slowly sinking into a lake of lava while he's being tormented by demon rats and a gigantic devil thing. Charlie screams for help covered in demons as the end of the ship he's on slowly descends into the lava... and then he wakes up.
Also, at the end of the film, a giant fiery figure strongly implied to be Lucifer himself appears, who turns the whole sky red, coupled with subtly ominous music. It doesn't help that he's there to take Charlie back to Hell with him. Worse, for half a second it looks like the devil is entering Anne-Marie's room...
What makes this scene even scarier? If one looks closely, they see the demon wasn't there to just get Charlie, he BROUGHT him there and was going to take him back afterwards. That means Charlie spent the time between his death and that moment in Hell, likely in the situation he dreamed about. No wonder he looked so upset...
Carface's vision of his fate, despite being a catchy musical number, does manage to invoke this, apparently on purpose! And Belladonna, when she snaps...oh boy!
Red, the demonic cat from All Dogs Go To Heaven 2.
King Gator, the grotesquely animated crocodile, has horrified children for years with his sexually ambiguous nature and innuendo (specifically, the song "Let's Make Music Together"). Not that scary.
In retrospect, it's one of the most disturbing things in a film ever because the alligator is eating the dog WITH THE LITTLE GIRL WATCHING!!! Good Lord.
The scene where Charlie falls in the water and frantically grabs for the watch while he sinks.
It gets even scarier. After Charlie gets Anne-Marie out of the burning boat first before going to get his watch, once the watch sinks to the bottom, it starts ticking irregularly and Charlie winces in pain, before diving down to get it. The watch stops and then an inky darkness that almost seems like a Shout Out to the underwater sequence during the "Rite of Spring" segment in Fantasia fills up the screen.
That demonic dog diva Belladonna is extremely terrifying at times.
"YOU CAN NEVER COME BACK."
Charlie's murder at the start of the first film. Imagine this, you got out of death row, your friends and customers are over-joyed to see you, your business partner who is also one of your closest friends is giving you a fair amount of profit and offers to find a place for you to hide and you go out and have a big party during Mardi Gras. Until you get so drunk that you can barely stand and taken to a dock by your business partner's lackey....then you feel the car hitting you while your best friend is desperately trying to warn you of your impending death.
Also in addition, the scene in Heaven. Maybe it was the Mood Whiplash from a deep, frighting crime related death scene of the main character to a fluffy sugar bowl based afterlife, the strangely calming music, the overly nice and law-abiding dog angel or the idea of being stuck in such a boring, sweet place for all eternity and being damned to hell for trying to go back to earth (which many people/dogs who died unexpectedly most likely did). I side with Charlie, I would NOT like to stay there forever.
Also the scene where Itchy is almost killed by Carface and his lackeys along with the shot of Charlie's casino burning down. Up till this point Itchy was my favorite character, to see the poor guy limping, covered in bruises and cuts and begging Charlie to give up on the casino so they both won't be killed almost made me burst into tears.