Palu was cited for trampling on Hurricanes lock Jeremy Thrush during Saturday night's match in Wellington, a 26-22 Waratahs win.
SANZAR judicial commissioner Bruce Squire considered video footage of the incident before clearing Palu.
Squire said it was clear from viewing television camera angles that were not available to the citing commissioner or broadcast on TV that Palu had stepped over Thrush.
Any contact had been accidental and had occurred as Thrush attempted to get to his feet as Palu stepped over him, he said.
Hurricanes captain Rodney So'oialo was also cited for stamping and trampling on his Waratahs opposite Phil Waugh and will face a judicial hearing in Wellington on Monday.