I dont need the counter to occupy the space also if the error occurs for more than 7 (N) times then I am suppose to report the error and reset the counter again I dont need the counter to occupy the space. .... i.e allocate a space and then free the space when not required?

If you are so tight for space that you can not afford one byte permanent storage for this purpose, you have other problems.
Often, when space get tight, I find a few rarely used variables and move them to idata/xdata.

Erik