Yesterday did little to improve sagging morale at the embattled U.S. Immigration and Naturalization Service.

INS aides saw their boss, commissioner Leonel J. Castillo, reduced to nervous mumbling before the House subcommittee on immigration, refugees and international law.

They heard the subcommittee chairwoman Rep. Elizabeth Holtzman (D-N.Y.), castigate their agency for being "totally out of control" and "out of touch with the 20th century."

Castillo and his aides failed to anwer numerous questions about the agency's budget and staffin, which prompted another subcommittee member, Rep. Hamilton Fish Jr. (r-d.y/.), to publicly comment: "This is just damned sad."

This was rough treatment, especially since castillo has been saying for some time now that the kinds of charges leveled by the subcommittee are valid and that his agency has been haed at work trying to straighten matters out.

Even an attempt by an INS panelist to pour a glass of water at yesterday's grueling budget hearing turned into a debacle of sorts.

The panelist, Associate Attorney General Michael J. Egan, forgot to move the cover from a pitcher of water. The cover fell off. Water poured out, onto the table. Holtzman, bemused, tossed a towel to the INS table for the panelists to clean up.

Castillo went before the subcommittee with a fiscal 1979 budget request for $298,817,000, about $6.5 million less than last year's INS budget. He told the subcommittee that the new budget involved a staff reduction of 574 positions, 269 of them in the INS border patrol and 115 in the INS inspection program

Castillo said the reductions were in keeping with President Carter's call for austerity. The subcommittee was not impressed.

Holtzman, for example, wanted to know why INS was reducing its budget at a time when it is having trouble streamlining its record-keeping procedures and computerizing its files.

"How can you keep track of the thousands of people coming into this country?" she sasked Castillo.

The commissioner raised a manila folder. "Most of our files are maintained in brown folders like these," he said.

An exasperated Holtzman shot back: "We want to see 20th century technology applied to this problem... That ought to bt a part of your budget authorization."

Other subcommittee members raised questions about the number of illegal Mexican immigrants coming into the country, about INS enforcement procedures, about the number of foreign students, especially Iranians, who were in the country but not in school.

Castillo and his aides responded with apparently unsubstantianted approximations, estimates, and frequent referrals to studies or matters under study -- much to the dissatisfaction of the subcommittee.

At on point, Castillo turned to anaide for an answer and the aide, redfaced, shook his head and said: "I don't have the answer."

Holtzman, irritated, asked Castillo if he and his aides had been told by her staff what questions to expect.

Egan, theassociate attorney general responsible for INS matters, said Holtzman's staff had only spoken to him about the subcommittee hearing Wednesday morning. Castillo told a reporter later he didn't get the questions until after the hearing.

Seill, Holtzman said later in an interview, the INS panel's performance was inexcusable.

"What can I tell you?," she said. "Here, you have an agency that is just incapable of dealing with problems... They are overwhelmed."

Attorney General Griffin Bell, who has jurisdiction over INS, had voiced similar sentiments the day before.