ocupado can either be an adjective or the past participle of ocupar = occupy.
- If the sentence is a perfect tense (presente or past perfect), and that ocupado comes just after the auxiliary haber, then it's a verb. (Me había ocupado)
- If the sentence is in the passive voice and ocupado comes just after the auxiliary ser, then it's a verb (Soy ocupado por eso)
- If ocupado comes after other stative verbs (estar for instance), or next to a noun, then it's an adjective (El hombre ocupado, El hombre está ocupado)
It should be "Disculpe Senor, usted esta ocupado?" The use of "usted" to reference/make it a formal "you". Any time "usted" is used it changes to the same as he or she (Yo, Tu, El/Ella/Usted) Tu - Est(as) El/Ella/Usted - Est(a) ... Yo - Teng(o) Tu - Tien(es) El/Ella/Usted- Tien(e)
You have crossed into more formal communication if the form of address is Señor, Señora, or other title. Those are clues to use to use the third person 'usted' form of the verb estar 'está'