Hi,
I am being sent to US on L1 Visa for 2 years. But I will be paid Per Diem in USA and my salary will be credited in India and tax will be debited from my salary in India.

Is the above process legal as per USA rules. If not legal what should be the processfollowed in a legal way to work out the above mentioned scenario.

This arrangement is not normal.
On the U.S. tax return, you must report your worldwide income earned when you are in the U.S. On the U.S. tax return, you will not get any credit for taxes paid in India as it is considered the U.S. income.

Even though you are being paid by an Indian company to your bank in India, once you exceed the 183-day Substantial Presence Test, your income will be considered to be U.S.-sourced and this subject to U.S. and state income taxes as well as FICA (Social Security and Medicare) taxes.

Further, once you hit the one-year annversary of your arrival, the per diem you are being paid becomes taxable income, because the IRS considers a job to be temporary (and thus eligible for non-taxable per diem) for ONLY one year. After the initial year, the job is considered to be permanent and the per diem becomes taxable compensation.