Yes when you use a VPN your ISP can see that you're sending traffic through a VPN that then connects to your internet service.
Using a VPN doesn't hide your IP address from the ISP as the ISP already knows your IP address when they assign it to you.
The VPN only hide your real IP address from the websites you're visiting and from search engines such as Google, Bing etc.
Still if you're using a VPN to download illegal things your ISP still knows about it but the website you're visiting and downloading doesn't know your real IP address so no one else but your ISP could track you down for the illegal activities.