A murder-for-hire case against AC/DC drummer Phil Rudd collapsed on Friday when New Zealand prosecutors found there was insufficient evidence to proceed, just 24 hours after police sensationally filed charges.

In a major embarrassment for the police, authorities said a charge of "attempt to procure murder" against Rudd had been withdrawn. However, the 60-year-old rocker is still accused of drug possession and threatening to kill, which carries a jail term of up to seven years.

Even with the primary charge dropped, the case still represents the second blow to AC/DC this year, after dementia forced founding member Malcolm Young to retire in September and move into a Sydney care facility.

But the heavy rock pioneers are vowing to play on, with a new album and tour coming up.

Rudd's barrister Paul Mabey said police failed to consult before taking the murder plot allegation to court on Thursday and prosecution lawyers ordered its withdrawal after a review found there was insufficient evidence.

"The charge alleging an attempt to procure murder should never have been laid," Mabey said in a statement. "The Crown Solicitor's (prosecutor's) opinion was not sought. The charge is now withdrawn."

He noted the case had attracted worldwide publicity and said Rudd had suffered "incalculable damage" and would consider "any possible remedies he may have".

"Questions arise as to the degree of care taken by those responsible for arresting and charging him," the lawyer said, pointing out the case had fallen apart less than a day after Rudd first appeared in court following a raid on his North island mansion.

Police in New Zealand have the power to lay charges in preliminary hearings and the case is then taken over by prosecutors working for the Crown Solicitor's office.

The Crown Solicitor's office confirmed the charge had been withdrawn but refused to comment further.

Mabey said Rudd would defend the charge of threatening to kill, and described the cannabis and methamphetamine possession charges against his client as "minor".

In the court documents tendered on Thursday, police had accused Rudd of trying to organise a hitman to kill two men in late September. Further details were not made available and the identities of the alleged hitman and his targets were suppressed by the judge.


'AC/DC vow to rock on'

AC/DC, who formed in Australia in the 1970s, said they had no prior knowledge of the case against Rudd and the band would continue.

"We've only become aware of Phil's arrest as the news was breaking. We have no further comment," a brief statement posted on the band's official website said.

"Phil's absence will not affect the release of our new album 'Rock or Bust' and upcoming tour next year."

"Rock or Bust" is due for release next month and AC/DC, one of the biggest-selling bands in history, plans to back the album with a global tour in 2015.

The Grammy award winners were inducted into the Rock'n'Roll Hall of Fame in 2003 after a string of hits including "Dirty Deeds Done Dirt Cheap", "Jailbreak" and "Highway to Hell".

The Australian-born Rudd has been with the band on-and-off since 1975 and moved to New Zealand in 1983, settling in Tauranga, a coastal community of about 110,000 people some 150 kilometres (90 miles) southeast of Auckland.

The drummer, who released a solo album "Head Job" in August, is free on bail and is scheduled to reappear on November 27 on the remaining charges.

He has refused to comment publicly about the allegations against him and local media on Friday carried images of him making an obscene gesture to photographers from his balcony.