Forex payment towards services by Indian staff of foreign supplier

Yes, you can legally make the payment in foreign currency to Germany since your contractual agreement is with the foreign supplier. However, because the installation services are performed in India, the payment qualifies as Fees for Technical Services (FTS) accrued in India. Therefore, you must deduct TDS under Section 195 and submit Forms 15CA and 15CB to your bank before making the remittance.