I have to create an application and service principal in the customer tenant using the partner tenant's app credentials as partner tenant is also an admin for all its customers.
This should be done through with no user intervention.
Is it possible to do this. Any help will be appreciated
Create Azure AD application in customer Tenant
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When you use app credentials what you trigger is the client credentials flow. The token you get will be for the tenant where the app is registered ie partner tenant in this case. If you want to create app registrations and service principals in customer's tenant I believe you need to use the app credentials from the customer's tenant and use this MS graph API to create the application and service principal that you want to create all with no user intervention.